1
EXHIBIT 10.145
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made effective as
of the 12th day of August, 1998, by and between DORFINCO CORPORATION, a Delaware
corporation ("Lender"), and PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Borrower").
W I T N E S S E T H :
WHEREAS, Borrower desires to borrow a loan in the amount of up to Four
Million and 00/100 Dollars ($4,000,000.00) (the "Loan") from Lender, and Lender
has agreed to make the Loan to Borrower, all subject to and accordance with the
terms and conditions of this Agreement;
WHEREAS, Borrower's obligations to Lender with respect to the Loan will
be secured by five (5) parcels of undeveloped land located generally in ▇▇▇
County, Nevada, and more particularly described in Exhibit "A" attached hereto
and incorporated herein (the "Property").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of
the parties and subject to the following terms and conditions, Borrower agrees
to borrow from Lender, and Lender agrees to loan to Borrower, the Loan for the
purposes provided herein. The Loan shall be evidenced by a Promissory Note (the
"Note") bearing even date herewith, and repayment thereof shall be secured by a
Deed of Trust, Security Agreement and Fixture Filing (the "Deed of Trust"), this
Agreement and, as described in on Exhibit "B" hereof, that certain loan and
security agreement and that certain deed of trust, pursuant to a First Amendment
to Loan and Security Agreement and a Third Amendment to Deed of Trust,
respectively (collectively, the "Amendments"), and guaranteed by MEGO Financial
Corp., a New York corporation (the "Guarantor"), by the execution of a Guaranty
Agreement in form and content acceptable to Lender (the "Guaranty"). This
Agreement, the Note, the Deed of Trust, the Amendments, the Guaranty, any
assignment of rents or leases, or both, and any and all other documents now or
hereafter executed by Borrower or any other affiliated person or party in
connection with or to evidence or secure payment of the Loan are sometimes
hereafter collectively referred to as the "Loan Documents".
A. DISBURSEMENTS AND MATURITY.
A.1 Conditions to Disbursement. Lender shall disburse the Loan
for the purposes provided herein once Borrower has: (a) provided Lender, at
Borrower's expense, with (w) copies of the recorded plat maps creating the five
(5) parcels of the Property (provided, however, that upon the written request of
Lender at any time prior to the Maturity Date, Borrower shall perform and
deliver to Lender within sixty (60) days of any such request an ALTA survey of
the Property or any one or more parcels thereof), (x) an ALTA lender's policy of
title insurance (the "Title Policy")
1
2
insuring the lien of the Deed of Trust as a first lien on the Property, in form,
content, and issued by a title insurer acceptable to Lender, (y) an appraisal,
in form, content and performed by a licensed appraiser acceptable to Lender,
showing a combined value of the Property equal to at least $12,000,000.00, and
(z) a phase one environmental assessment report, in form and substance
satisfactory to Lender, for the Property; (b) satisfied all conditions set forth
herein; (c) deposited into escrow (or, in lieu thereof, Lender shall have
disbursed to itself from the Loan proceeds) the following sums: (i) the balance
due and owing on the Closing Date (as hereinafter defined) of the Lender's total
loan commitment fee of $40,000.00; (ii) all closing costs and fees; and (iii)
Lender's reasonable attorney's fees incurred in connection herewith; and (d)
executed and delivered to Lender all Loan Documents except for the Amendments.
The forms of the Amendments are attached hereto as Exhibits "C" and "D",
respectively, and Borrower hereby covenants and agrees that it will execute and
deliver or cause to be executed and delivered the Amendments in substantially
the form and substance of the forms of the Amendments attached hereto, in
recordable form, as applicable, within forty-five (45) days following the
Closing Date.
A.2 Disbursement Amounts. On the Closing Date, the entire amount
of the Loan will be disbursed to Borrower, or, in the event that less than the
entire amount of the Loan is disbursed for any reason, then at least four (4)
business days prior to any requested disbursement date after the Closing Date,
Borrower shall submit to Lender a request for disbursement of Loan proceeds that
shall specify the amount of Loan proceeds Borrower requests be disbursed and the
date on which such disbursement is requested to be made. Lender shall disburse
to Borrower all of the Loan proceeds (or a lesser amount thereof as Borrower may
request) on the Closing Date or the requested Loan proceeds on the requested
disbursement date after the Closing Date, provided, however, that in either
case, the following conditions to disbursement shall have been satisfied:
(a) The requirements set forth in Section A.1 above as to
the conditions for disbursement have been satisfied;
(b) The amount of Loan proceeds requested to be disbursed,
plus the aggregate amount of Loan proceeds previously disbursed by Lender to
Borrower, does not exceed the maximum Loan amount of $4,000,000.00;
(c) The disbursement date is the Closing Date or any date
thereafter requested for any requested disbursement of Loan proceeds, provided,
however, that a disbursement date after the Closing Date must be within the
period commencing on the date (the "Closing Date") that the Deed of Trust is
recorded in the Official Records of the Office of the Recorder of ▇▇▇▇▇ County,
Nevada and ending on the date (the "Final Disbursement Date"), which is the
sixtieth (60th) day after the Closing Date;
(d) No Event of Default, or event which, with the giving of
notice or passage of time or both would become an Event of Default hereunder
shall have occurred and be continuing as of the date of any submission by
Borrower of a request for disbursement or the Closing Date or any other date on
which any disbursement is to be made;
2
3
(e) The title company issuing the Title Policy shall be
prepared to and shall issue to Lender as beneficiary of the Deed of Trust such
title endorsements as Lender may require in connection with any such
disbursement of Loan proceeds;
(f) Borrower shall have paid to Lender (or, in lieu thereof,
Lender shall have disbursed to itself from the Loan proceeds) a funding fee for
each requested disbursement of Loan proceeds in an amount equal to one percent
(1.0%) of the amount of Loan proceeds requested to be disbursed. Borrower
acknowledges that the aforesaid funding fee is not imposed as a charge for the
use of money, but rather is imposed to permit Lender to recoup its
administrative charges and other costs in disbursing Loan proceeds, and said
funding fee shall in no way be deemed an interest charge; and
(g) After disbursement of any proceeds of the Loan, the
Maximum LTV Ratio would not and shall not exceed 50%. "Maximum LTV Ratio" means
the ratio of the total outstanding principal balance of the Loan to the
appraised values of the five parcels of land comprising the Property. For
purposed of this paragraph (g) only, the appraised values of such five parcels
of land comprising the Property are as follows:
Parcel 1: A 3.76 acre site located generally at the southwest corner of
Calvada Boulevard and Highway 160. Appraised value: $780,000.00.
Parcel 2: A 3.80 acre site located generally at the northwest corner of
Calvada Boulevard and Highway 160. Appraised value: $785,000.00.
Parcel 3: A 31.83 acre site (a circular median) located generally in Calveda
Boulevard between Dandelion Street and Charleston Drive. Appraised
value: $3,760,000.00.
Parcel 4: A 25.45 acre site (irregular shaped) located generally at the
northwest corner of Shoshone Drive and ▇▇▇▇▇▇▇ Pass Road.
Appraised value: $3,050,000.00.
Parcel 5: A 32.98 acre site (irregular shaped) located between Highway
160 and Pahrump ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇. Appraised
value: $3,925,000.00.
If Borrower does not request and receive disbursements of Loan proceeds
in the aggregate amount of $4,000,000.00 by the Final Disbursement Date, then
the excess amount of Loan proceeds over the aggregate amount of all
disbursements up to the maximum Loan amount of $4,000,000.00 may not thereafter
be borrowed.
A.3 Use of Proceeds. Borrower shall use the proceeds of the Loan
for general working capital purposes.
A.4 Interest. Interest on the outstanding principal balance of
the Loan will be due and payable as set forth in the Note.
3
4
A.5 Maturity Date. The outstanding principal balance of the Loan,
together with all accrued and unpaid interest then due and owing and any other
amounts then due and owing under any of the Loan Documents, shall be due and
payable on August 31, 1999 (the "Maturity Date"). The Maturity Date may be
extended for a period of one (1) year (the last day of such extension period is
herein the "Extended Maturity Date"), subject to the payment of an extension fee
in the amount of one and one-half percent (1.5%) of the then outstanding balance
of the Loan, and subject to and in accordance with all other terms and
procedures for the extension of the term of the Loan to the Extended Maturity
Date set forth in the Note.
A.6 Prepayment. The outstanding principal balance of the Loan may
be prepaid in whole or in part at any time prior to the Maturity Date, or, if
Borrower elects to extend the Maturity Date, the Extended Maturity Date, without
penalty or premium, provided, however, that any such prepayment must be
accompanied by the payment of all accrued and unpaid interest on the amount
being prepaid plus any other amounts then due and payable under the Note or any
of the other Loan Documents. Partial prepayments shall be applied to the last
due payment of principal under the Note and shall be in addition to, and not in
lieu of, any other payment then or thereafter due under the Note.
A.7 Non-Revolving Loan. The Loan is a term loan and not a
revolving loan, and amounts borrowed and repaid by Borrower may not be
reborrowed.
A.8 Additional Security. In addition to the Deed of Trust and any
other security document (except the Amendments) given by Borrower or an
affiliate to secure the Loan, the Loan, pursuant to the Amendments, shall also
be cross-collateralized by and cross-defaulted to the promissory notes
evidencing the loans and the deed of trust and other security instruments
described on Exhibit "B" hereto (together with any and all other agreements,
instruments or other documents relating to the documents described on Exhibit
"B" below, collectively, the "Related Loan Documents") securing said loans
(collectively, the "Related Indebtedness") made by Lender or its parent Textron
Financial Corporation to Borrower or its subsidiary corporation Steamboat
Suites, Inc.
A.9 Release of Security. Notwithstanding any other provision of
this Agreement or any other Loan Document to the contrary, and, subject to the
limitation set forth in the proviso below, without regard to whether the Related
Indebtedness has been repaid and satisfied in full, upon the full repayment and
satisfaction of the Loan and any and all other amounts due and owing with
respect to the Loan and any other secured obligations of Borrower to Lender
under the Loan Documents (except for the Related Indebtedness and those arising
under the Amendments), the collateral security in the real and personal property
and property rights and interests encumbered by the Deed of Trust and any other
Loan Document (including the Amendments to the extent of the Loan obligations
secured thereby) shall be released, terminated and reconveyed to the person(s)
entitled thereto, and all other Loan Documents shall be terminated and deemed to
be of no further force and effect without the requirement that any additional
payment of any kind, including a release payment, be made; provided, however and
except that, if there exists with respect to the Related
4
5
Indebtedness at the time of repayment and performance in full of the Loan a
default or event of default, or any event or circumstance which with the passage
of time or giving of notice would become a default or event of default under the
Related Loan Documents, then the release and reconveyance of the lien of the
Deed of Trust and the release and termination of any other security interest,
encumbrance or collateral assignment or transfer created under any other of the
Loan Documents shall not be granted by Lender for so long as any such default or
event of default or such other event or circumstance is continuing.
B. REPRESENTATIONS, COVENANTS AND WARRANTIES.
Borrower hereby unconditionally represents, covenants and
warrants as follows:
▇.▇ Power. If Borrower or any signatory who signs on its behalf
is a corporation, partnership, limited liability company, or trust, that it is a
corporation duly incorporated, or a partnership, limited liability company, or
trust duly organized, and in any event validly existing under the laws of the
state of its incorporation or origination and duly qualified to do business in
the State of Nevada, with requisite power and authority to (i) incur the
indebtedness evidenced by the Note; (ii) enter into this Agreement and grant the
Deed of Trust; and (iii) enter into any other Loan Documents executed and
delivered to Lender concurrently herewith.
B.2 Authority. That this Agreement, the Note, the Deed of Trust
and all other Loan Documents executed and delivered to Lender concurrently
herewith by Borrower were executed in accordance with the requirements of law,
and, if Borrower or any signatory who signs on its behalf is a corporation,
partnership, limited liability company, or trust, in accordance with any
requirements of its articles of incorporation, articles of partnership, articles
of organization and/or operating agreement, or declaration of trust, and any
amendments thereto, and that the execution of the same, and the full and
complete performance of the provisions thereof, is authorized by its bylaws,
articles of organization, partnership agreement and/or operating agreement, or
declaration of trust, and pursuant to a duly adopted resolution of its board of
directors, partners, members and/or managers or trustees, and will not result in
any breach of, or constitute a default under, or result in the creation of any
lien, charge or encumbrance (other than those contained herein or in any
instrument delivered to Lender concurrently herewith) upon any property or
assets of Borrower under any indenture, mortgage, deed of trust, bank loan or
credit agreement or other instrument or agreement to which Borrower is a party
or by which Borrower is bound or, if applicable, under Borrower's corporate
charter, bylaws, articles of organization, partnership agreement and/or
operating agreement, or declaration of trust.
B.3 Financial Statements. Any and all balance sheets, statements
of income or loss, reconciliation of surplus and financial data of any other
kind heretofore furnished Lender by or on behalf of Borrower and the Guarantor
are true and correct in all material respects, and fairly and accurately present
the financial condition of the subjects thereof as of the dates thereof, and no
material adverse change has occurred in the financial condition reflected
therein since the dates of the most recent financial data submitted to Lender.
During the Loan term, Borrower shall provide
5
6
Lender with such financial information relating to the Borrower, the Guarantor
or the Property as may be required in the Deed of Trust or as Lender may
reasonably request.
B.4 Litigation. Except as disclosed on Exhibit "E" attached
hereto, there are no actions, suits or proceedings (collectively "Proceedings")
pending, or to the knowledge of Borrower threatened, against or affecting
Borrower, the Guarantor, the Property, or involving the validity or
enforceability of the Deed of Trust or the priority of the lien and security
interest thereof, and no event ("Adverse Event") has occurred (including
specifically Borrower's execution of this Agreement, the Note, the Deed of Trust
or any of the other Loan Documents) which will violate in any material respect,
be in conflict with, result in the breach of or constitute (with due notice or
lapse of time, or both) a default under any Legal Requirement (as hereafter
defined), or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever on the Property other than the liens and
security interests created by, or referred to in, the Loan Documents. Borrower
shall give Lender written notice of any pending or threatened Proceeding or any
Adverse Event promptly after Borrower obtains knowledge thereof.
B.5 Permits. In addition to all other conditions to disbursement
set forth in this Agreement, before requesting, or being entitled to, any
disbursement of the Loan, Borrower shall have complied, and shall have caused
the Property to comply, with all Legal Requirements.
B.6 Year 2000 Compliance. Borrower acknowledges that it is aware
of the possible impact of the year 2000 problem (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999) upon its computer applications and on-going business.
Borrower represents that any corrective action reasonably necessary to mitigate
the adverse effects of the year 2000 problem on Borrower's business and
operations will be taken and that Borrower does not currently have any reason to
believe that the year 2000 problem will result in a material adverse change in
Borrower's or any of its affiliates' business condition (financial or
otherwise), operations, properties or prospects, or Borrower's ability to repay
the Loan.
The foregoing representations, covenants and warranties shall
survive until all sums payable pursuant to the Note or this Agreement, or which
are secured by the Deed of Trust or any of the other Loan Documents, have been
paid in full.
C. DEFAULT.
C.l Events of Default. Any of the following shall constitute a
default hereunder (an "Event of Default"):
(a) The occurrence of a default or Event of Default under
the Deed of Trust which continues after any applicable grace or cure period;
6
7
(b) The neglect, failure or refusal of Borrower to keep in
full force and effect any permit, license, consent or approval required
hereunder, or under the Loan Documents, and the failure by Borrower to cure any
such neglect, failure or refusal within twenty (20) days after written notice
thereof is given to Borrower;
(c) The false or misleading nature in any material respect
of any representation or warranty of Borrower contained herein or in any
representation to Lender concerning the financial condition of Borrower or of
the Guarantor, or the reasonable determination by Lender of a material threat to
its security by reason of a material adverse change in the financial condition
of Borrower or the Guarantor;
(d) The occurrence of a default, event of default or other
breach by Borrower, Guarantor, or Borrower's subsidiary corporation, Steamboat
Suites, Inc., under or with respect to any indebtedness or obligations of
Borrower, Guarantor or Steamboat Suites, Inc. to Lender or any of Lender's
affiliates which continues after any applicable grace or cure period; or
(e) The failure of Borrower to execute and deliver or
cause to be executed and delivered the Amendments in substantially the form and
substance as the forms of the Amendments attached hereto, in recordable form
within forty-five (45) days following the Closing Date.
C.2 Acceleration. Upon the occurrence of an Event of Default
hereunder, the entire unpaid balance of the Note including all accrued interest
shall, at the option of Lender, become immediately due and payable and Lender
shall have such rights of enforcement as may be afforded by law, hereunder, or
under the Note, the Deed of Trust or any of the other Loan Documents.
D. REMEDIES.
D.l General. Upon the occurrence of an Event of Default
hereunder, Lender shall have all rights and remedies available to Lender under
the law, hereunder or under the Note (including but not limited to the right to
accelerate the Note), the Deed of Trust or any of the other Loan Documents.
D.2 Right to Advance or Post Funds. Where disputes arise which,
in the good faith opinion of Lender, may endanger the performance of any
covenant contained herein, Lender may, following ten (10) days written notice to
Borrower, enter into such agreements or advance funds for the account of
Borrower without prejudice to Borrower's rights, if any, to recover said funds
from the party to whom paid. Such agreement or agreements may take the form
which Lender, in its discretion, deems proper, including but not limited to
agreements to indemnify a title insurer against possible assertion of lien
claims or to pay disputed amounts to contractors if Borrower is unable or
unwilling to pay the same. All sums paid or agreed to be paid pursuant to any
such undertaking shall be for the account of Borrower, Borrower shall reimburse
Lender for any such
7
8
payments made upon demand therefor, with interest at the rate then applicable
under the Note until date of reimbursement, and such advances and interest shall
be secured by the Deed of Trust.
D.3 Curing of Defaults by Disbursement. Upon the occurrence of an
Event of Default which may be cured by the payment of money, Lender, without
waiving any right of acceleration or foreclosure under the Note or the Deed of
Trust which Lender may have by reason of such default, or any other right Lender
may have against Borrower because of such default, shall have the right to make
such payment from the Loan, thereby curing the default.
D.4 Remedies are Cumulative. All remedies of Lender provided for
herein are cumulative and shall be in addition to any and all other rights and
remedies provided in the Note, the Deed of Trust or any of the other Loan
Documents or by law. The exercise of any rights of Lender hereunder shall not in
any way constitute a cure or waiver of a default hereunder or elsewhere, or
invalidate any act done pursuant to any notice of default, or prejudice Lender
in the exercise of any of its other rights hereunder or elsewhere unless, in the
exercise of said rights, Lender realizes all amounts owed to it hereunder and
under the Note, the Deed of Trust and the other Loan Documents.
D.5 Right of Contest. Borrower shall have the right to contest in
good faith any claim, demand, levy, or assessment by a third party, the
assertion or non-satisfaction of which would constitute an Event of Default
hereunder. Any such contest shall be prosecuted diligently and in a manner not
prejudicial to Lender or the rights of Lender hereunder. In the event that
Lender reasonably determines that such claim, demand, levy or assessment could
adversely affect Lender's interest in the Property, upon demand by Lender,
Borrower shall deposit funds with Lender or obtain and record a bond
satisfactory to Lender in an amount sufficient to cover any amounts which may be
owing in the event the contest may be unsuccessful. Borrower shall make such
deposit or obtain and record such bond, as the case may be, within five (5) days
after demand therefor and, if made by payment of funds to Lender, the amount so
deposited shall be disbursed in accordance with the resolution of the contest to
Borrower or the adverse claimant. The mere fact of any such contest shall not be
deemed prejudicial to Lender or any of its rights hereunder.
E. MISCELLANEOUS.
E.l No Waiver. No waiver of any default or breach by Borrower
hereunder shall be implied from any omission by Lender to take action on account
of such default, and no express waiver shall affect any default other than the
default specified in the waiver and the waiver shall be operative only for the
time and to the extent therein stated. Waivers of any covenant, term, or
condition contained herein shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by
Lender to or of any act by Borrower requiring further consent or approval shall
not be deemed to waive or render unnecessary the consent or approval to or of
any subsequent similar act.
E.2 No Third Parties Benefitted. This Agreement is made
and entered into for the sole protection and benefit of Lender and Borrower. All
conditions of the obligations of Lender
8
9
to make advances hereunder are imposed solely and exclusively for the benefit of
Lender and may be freely modified by Lender with the concurrence of Borrower or
waived by Lender in whole or in part at any time if in its sole discretion it
deems it advisable to do so. No person other than Borrower shall have standing
to require Lender to make any Loan advances or be a beneficiary of this
Agreement or of any of the advances to be made hereunder.
E.3 Intentionally Omitted.
E.4 Notices, Demands and Requests. All notices, demands or
requests provided for or permitted to be given pursuant to this Agreement must
be in writing and shall be deemed to have been properly given or served by
depositing the same with a nationally recognized overnight courier service or in
the United States Mail, postpaid and registered or certified return receipt
requested, and addressed to the addresses set forth on the signature page
hereof. All notices, demands and requests shall be effective upon being
deposited with a nationally recognized courier service or, on the date that is
two (2) business days after such deposit, upon being deposited in the United
States Mail. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request sent. By giving at least thirty (30)
days written notice hereof, Borrower or Lender shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses.
E.5 Authority to File Notices. Borrower irrevocably appoints,
designates, and authorizes Lender as its agent (said agency being coupled with
an interest) to file for record any notice that Lender deems reasonably
necessary or desirable to protect its interest hereunder or under the Note, the
Deed of Trust or any of the other Loan Documents. Lender shall only file such
notices if Borrower fails, within ten (10) days after written demand by Lender,
to do so.
E.6 Expenses. Borrower shall pay promptly all reasonable costs,
charges, and expenses incurred by Lender in connection with the Loan, including
but not limited to commitment fees, loan fees, service charges, title charges,
tax and lien service charges, costs of inspection, recording fees, processing
fees, appraisal fees, attorneys' fees, real property taxes and assessments and
insurance premiums, and any and all fees in consideration of Lender's commitment
to provide the Loan.
E.7 Actions. Lender shall have the right to commence, appear in
or defend any action or proceeding purporting to affect the Property, or the
rights, duties, or liabilities of the parties hereunder, or the disbursement of
any funds. In connection therewith, Lender may incur and pay costs and expenses,
including reasonable attorneys' fees, and Borrower shall pay to Lender on demand
all such costs and expenses and Lender is authorized to disburse funds from the
Loan for said purpose.
E.8 Commissions and Brokerage Fee. Borrower shall indemnify
Lender from any responsibility and/or liability for the payment of any
commission, charge or brokerage fees to
9
10
anyone which may be payable in connection with the making or refinance of the
Loan, it being understood that any such commission, charge, or brokerage fees
will be paid directly by Borrower to the party or parties entitled thereto.
Neither Lender nor Borrower are aware of any person or entity entitled to a
commission, charge or brokerage fee as a result of the Loan.
E.9 Applicable Law. This Agreement and all of the other Loan
Documents are to be governed by and construed in accordance with the laws of the
State of Rhode Island (and Colorado to the extent of the Amendment applicable to
the property located within Colorado) without regard to conflict of laws
principles; provided, however, that the laws of the State of Nevada shall apply
with respect to the procedural and substantive requirements of Nevada real
property and personal property law with request to any foreclosure or other
action to realize all real and personal property collateral security for the
Loan located within the State of Nevada; and provided further, however, that the
laws of the State of Colorado shall apply with respect to the procedural and
substantive requirements of Colorado real property and personal property law
with respect to any foreclosure or other action to realize all real and personal
property collateral security for the Loan located within Colorado. Subject to
the foregoing provisos, the Borrower hereby consents to the non-exclusive
personal jurisdiction of the federal and state courts located in Providence
County, Rhode Island in any and all actions between the Borrower and the Lender
arising under or in connection with this Note, the Loan or any of the Loan
Documents.
E.10 Heirs, Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the heirs, successors, assigns and
personal representatives of the parties hereto; provided, however, that Borrower
shall not assign its rights hereunder in whole or in part without the prior
written consent of Lender, which such consent may be granted or withheld in the
sole and absolute discretion of Lender. Any such assignment without said consent
shall be void. Lender shall have the absolute right at any time and from time to
time to assign to all affiliates and subsidiaries of Lender and to participants
or others all or certain of its rights and obligations hereunder but no such
assignment shall, without Borrower's written consent, relieve Lender of its
obligations hereunder.
E.11 Time. Time is of the essence of this Agreement and each and
every provision hereof in which time is an element.
E.12 Supplemental Agreement. The provisions of this Agreement are
not intended to supersede the provisions of the Deed of Trust but shall be
construed as supplemental thereto. This Agreement, and all representations and
warranties contained herein, shall remain in effect until the Loan has been paid
in full.
E.13 Legal Requirements. "Legal Requirements" shall mean (i) any
and all present and future judicial decisions, statutes, rulings, directions,
rules, regulations, permits, certificates or ordinances of any governmental
authority in any way applicable to Borrower or the Property, including the
ownership, use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction thereof, (ii) Borrower's presently or subsequently
effective bylaws and arti-
10
11
cles of incorporation or partnership, limited partnership, joint venture, trust
or other form of business association agreement, (iii) any and all material
terms, provisions and conditions of any commitment between Lender and Borrower
which are to be performed or observed by Borrower, and (iv) any and all material
terms, provisions and conditions of any leases and other contracts (written or
oral) of any nature that relate, in any way, to the Property and to which
Borrower may be bound, including but not limited to any lease or other contract
pursuant to which Borrower is granted a possessory interest in the Property.
E.14 Relationship of Parties. The relationship between Borrower
and Lender is, and at all time shall remain, solely that of debtor and creditor,
and shall not be, or be construed to be, a joint venture, equity venture,
partnership or other relationship of any nature, and Lender neither undertakes
nor assumes any responsibility or duty to Borrower or to any other person with
respect to the Property or the Loan, except as expressly provided in the Loan
Documents; and notwithstanding any other provision of the Loan Documents: (a)
Lender is not, and shall not be construed as, a partner, joint venturer, alter
ego, manager, controlling person or other business associate or participant of
any kind of Borrower or its partners or members and Lender does not intend to
ever assume such status; (b) Lender shall in no event be liable for any debts,
expenses or losses incurred or sustained by Borrower; (c) Lender does not intend
to ever assume any responsibility to any person for the quality, suitability,
safety or condition of the Property; and (d) Lender shall not be deemed
responsible for or a participant in any acts, omissions or decisions of Borrower
or its partners or members.
E.15 Attorneys' Fees and Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this Agreement
or because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which he may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Loan and
Security Agreement the day and year first above written.
Preferred Equities Corporation PREFERRED EQUITIES CORPORATION,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ a Nevada corporation
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Its: President
---------------------------
11
12
DORFINCO CORPORATION DORFINCO CORPORATION,
c/o Textron Financial Corporation a Delaware corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Division Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By: ______________________________
Name: ______________________________
Its: ______________________________
12
13
EXHIBIT "A"
Legal Description
All that real property situated in the State of Nevada, County of ▇▇▇, bounded
and described as follows:
Parcel 1:
Lot One (1) Block One (1) of CALVADA VALLEY UNIT NO. 2 as shown by map recorded
October 5, 1970 as File No. 20291 in the Office of the County Recorder of ▇▇▇
County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 2:
Lot One hundred forty-eight (148) in Block Sixteen (16) of CALVADA VALLEY UNIT
NO. 6, as shown by map recorded February 5, 1973 as Document No. 36024 in the
Office of the County Recorder of ▇▇▇ County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 3:
Parcels One (1) and Three (3) of Parcel Map recorded May 24, 1983 as File No.
81177 and amended by Certificate of Amendment recorded June 14, 1983 as File No.
83144 and by Certificate of Amendment recorded December 12, 1983 as File No.
99135 and by Certificate of Amendment recorded March 16, 1992 as File No. 304864
of Official Records, ▇▇▇ County, Nevada.
Parcel 4:
Parcel Two (2) as shown by Parcel Map recorded April 26, 1994 as File No. 351410
of Official Records, ▇▇▇ County, Nevada.
Parcel 5:
Lot Forty (40) in Block Six (6) of AMENDED PLAT OF CALVADA VALLEY UNIT 6,
recorded December 28, 1993 as Document No. 345007 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
1
14
Lots Nineteen (19) and Nineteen A (19A) (to the extent of Preferred Equities
Corporation's reversionary interest in Lot Nineteen A (19A)) of Block Six (6) of
CALVADA VALLEY UNIT NO. 6, recorded February 5, 1973 as File No. 36024 of
Official Records, ▇▇▇ County, Nevada, more particularly described as Parcel
Nineteen (19) as shown on Parcel Map recorded January 6, 1983 as File No. 72610
of Official Records, ▇▇▇ County, Nevada.
Lot One (1) in Block Fifteen (15), Lots One hundred seventy-three (173) and One
hundred seventy-four (174) in Block Eleven (11) and Lot Three hundred
twenty-three (323) in Block Six (6) of CALVADA VALLEY UNIT NO. 6, as shown by
map recorded February 5, 1973 as Document No. 36024 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
2
15
EXHIBIT "B"
1. A loan made by Lender to Borrower in the amount of up to $7,500,000,
evidenced by a promissory note in such amount dated August 9, 1991, and secured
by, among other things, a Loan and Security Agreement dated as of July 31, 1991,
by and between Borrower as borrower and Lender as lender, and guaranteed by MEGO
Financial Corp.
2. A loan made by Textron Financial Corporation, a Delaware corporation and an
affiliate of Lender's ("Textron"), to Borrower's subsidiary, Steamboat Suites,
Inc. ("SSI"), in the amount of up to $15,000,000, evidenced by a promissory note
in such amount dated November 30, 1995, and secured by, among other things, a
deed of trust from SSI to Textron dated October 5, 1994, as amended or restated,
and recorded in the Routt County Clerk and Recorder's office on October 6, 1994,
in Book 701 at Page No. 1795, a first amendment to deed of trust from SSI to
Textron dated February 27, 1995, and recorded in the Routt County Clerk and
Recorder's office on March 22, 1995 in Book 706 at Page 339, a second amendment
to deed of trust from SSI to Textron dated November 29, 1996, and recorded in
the Routt County Clerk and Recorder's office on December 20, 1996 in Book 728 at
Page 320, and as further amended or restated, and guaranteed by Borrower.
1
16
EXHIBIT "C"
WHEN RECORDED MAIL TO:
DORFINCO CORPORATION
c/o Textron Financial Corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-▇▇▇▇,
Division Counsel
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement (this "Amendment")
is made and entered into as of August 12, 1998, by and between PREFERRED
EQUITIES CORPORATION, a Nevada corporation ("Borrower"), and DORFINCO
CORPORATION, a Delaware corporation ("Lender").
FACTUAL BACKGROUND
A. Under a Loan and Security Agreement dated as of August 12, 1998,
between Lender as lender and Borrower as borrower (the "Loan Agreement"), Lender
has agreed to make a loan in the principal amount of Four Million and 00/100
Dollars ($4,000,000.00) (as defined in the Loan Agreement and herein, the
"Loan") to Borrower. Capitalized terms used herein without definition have the
meanings given to them in the Loan Agreement.
B. Pursuant to the Loan Agreement, the Loan will be cross-collateralized
by and cross-defaulted with that certain Loan and Security Agreement, dated as
of July 31, 1991, between Lender as lender and Borrower as borrower (herein, the
"Related Loan Agreement"), which secures indebtedness of Borrower to Lender in
an amount of up to Seven Million Five Hundred Thousand Dollars ($7,500,000) (the
"Related Loan"), and other deeds of trust and collateral as described in the
Loan Agreement.
C. Each of the Loan and the Related Loan is guaranteed by Mego Financial
Corp., a New York corporation ("Guarantor"), in accordance with (i) with respect
to the Loan, that certain Guaranty Agreement dated of even date herewith, and
(ii) with respect to the Related Loan, that certain Guaranty Agreement dated as
of July 31, 1991 (collectively, the "Guarantees").
D. Borrower is a wholly-owned subsidiary corporation of Guarantor. It is
of material and substantial benefit to Guarantor that the Loan be made to
Borrower, and each of Guarantor and
1
17
Borrower acknowledges that it has received full and adequate consideration for
the incurrence by it of the additional obligations to Lender as set forth in
this Amendment.
E. This Amendment is a "Loan Document" as defined in the Loan Agreement.
F. Lender and Borrower now wish to amend the Related Loan Agreement to
provide that it is cross-defaulted to and cross-collateralized with the
obligations of Borrower with respect to the Loan and any other indebtedness and
obligations of Borrower to Lender.
AGREEMENT
Therefore, Lender and Borrower agree as follows:
1. Recitals. The recitals set forth above in the Factual Background are
true, accurate and correct.
2. Reaffirmation of Related Loan Agreement. Borrower reaffirms all of
its obligations under the Related Loan Agreement, and Borrower acknowledges that
it has no claims, offset or defenses with respect to the payment of any sum due
under the Related Loan Agreement or any other loan documents, promissory notes
or other agreements of any kind evidencing any indebtedness of Borrower to
Lender to which it is a party.
3. Amendment. The Related Loan Agreement is hereby amended as follows:
(a) The occurrence of a breach, default or event of default under
or with respect to the Loan and any Loan Document after the expiration
of any applicable grace period shall be an Event of Default or Default
under the Related Loan Agreement, as amended.
(b) The lien of the Related Loan Agreement shall secure all
indebtedness and other obligations of Borrower with respect to the Loan
and any other indebtedness and obligations of Borrower to Lender, and to
and with all indebtedness and other obligations of Steamboat Suites,
Inc., a Colorado corporation, to Lender or its affiliate, Textron
Financial Corporation, a Delaware corporation.
4. Conditions Precedent. Before this Amendment becomes effective and any
party becomes obligated under it, all of the following conditions shall have
been satisfied at Lender's sole cost and expense in a manner acceptable to
Lender in the exercise of Lender's sole judgment:
(a) Lender shall have received fully executed and acknowledged
originals of this Amendment, the attached consent signed by Guarantor
and any other documents which Lender may require or request in
accordance with this Amendment or the other Loan Documents.
2
18
(b) Lender shall have received reimbursement (or in lieu thereof,
shall have retained Loan proceeds in a sufficient amount to cover such
costs and expenses), in immediately available funds, of all costs and
expenses incurred by Lender in connection with this Amendment, including
charges for title insurance (including endorsements), recording, filing
and escrow charges, fees for appraisal services, and legal fees and
expenses of Lender's counsel. Such costs and expenses may include the
actual costs for services for Lender's in-house staffs, such as legal
and appraisal services.
5. Borrower's Representation and Warranties. Borrower represents and
warrants to Lender as follows:
(a) Accuracy. All representations and warranties made and given
by Borrower herein are true, accurate and correct.
(b) No Default. No Default or Event of Default has occurred and
is continuing under the Related Loan Agreement or this Amendment, and no
event has occurred and is continuing which, with notice or the passage
of time or both, would be a Default or Event of Default.
(c) Property. Borrower continues to lawfully possess and hold
title to the property encumbered by the Related Loan Agreement, as
amended by this Amendment, and the security interests, collateral
assignments and other collateral transfers made by Borrower in the
Related Loan Agreement as amended constitute a first and prior security
interest encumbering that property, subject to permitted exceptions to
title approved by Lender.
6. No Prejudice: Reservation of Rights. This Amendment shall not
prejudice any rights or remedies of Lender under the Loan Documents. Lender
reserves, without limitation, all rights which it has against any indemnitor,
guarantor, or endorser of the promissory note secured by the Related Loan
Agreement.
7. No Impairment. Except as specifically hereby amended, the Related
Loan Agreement shall remain unaffected by this Amendment, and the Related Loan
Agreement shall remain in full force and effect. Nothing in this Amendment shall
impair the security interests, collateral assignments or other collateral
transfers arising under the Related Loan Agreement, which shall remain a
security agreement, creating a first priority security interest in the property
described therein, subject to permitted exceptions to title approved by Lender.
8. Intentionally Omitted.
9. Miscellaneous. If any court of competent jurisdiction determines any
provision of this Amendment to be invalid, illegal or unenforceable, that
portion shall be deemed severed from this Amendment, which shall remain in full
force and effect as though the invalid, illegal or unenforceable portion had
never been a part hereof. This Amendment shall be governed by the laws
3
19
of the State of Nevada, without regard to the choice of law rules of that State.
As used here, the word "includes(s)" means "Include(s), without limitation", and
the word "including" means "including, but not limited to."
BORROWER:
PREFERRED EQUITIES CORPORATION, a Nevada
corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Title: President
-------------------------------------
LENDER:
DORFINCO CORPORATION, a Delaware corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
4
20
GUARANTOR'S CONSENT
The undersigned Guarantor hereby consents to the terms, conditions and
provisions of the foregoing First Amendment to Loan and Security Agreement and
the transactions contemplated by it. Guarantor hereby affirms the full force and
effectiveness of the Guarantees (as defined therein) and its obligations
thereunder with respect to any indebtedness and obligations of Borrower to
Lender or any of its affiliates guaranteed by Guarantor.
Dated: August 12, 1998
ACKNOWLEDGED BY GUARANTOR:
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Title: Vice President
---------------------------------
5
21
EXHIBIT "D"
WHEN RECORDED MAIL TO:
TEXTRON FINANCIAL CORPORATION
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-▇▇▇▇,
Division Counsel
THIRD AMENDMENT TO COMBINATION DEED OF TRUST,
SECURITY AGREEMENT AND FIXTURE FILING
This Third Amendment to Combination Deed of Trust, Security Agreement
and Fixture Filing (this "Amendment") is made and entered into as of August 12,
1998, by and between STEAMBOAT SUITES, INC., a Colorado corporation ("Grantor"),
and TEXTRON FINANCIAL CORPORATION, a Delaware corporation ("Beneficiary").
FACTUAL BACKGROUND
A. Under a Loan and Security Agreement dated as of August 12, 1998,
between Dorfinco Corporation, a Delaware corporation and an affiliate of
Beneficiary's, as lender ("Lender") and Preferred Equities Corporation as
borrower ("Borrower") (the "Loan Agreement"), Lender has agreed to make a loan
in the principal amount of up to Four Million and 00/100 Dollars ($4,000,000.00)
(as defined in the Loan Agreement and herein, the "Loan") to Borrower.
Capitalized terms used herein without definition have the meanings given to them
in the Loan Agreement.
B. Pursuant to the Loan Agreement, the Loan will be cross-collateralized
by and cross-defaulted with a deed of trust securing a loan in the original
principal amount of $15,000,000 from Beneficiary to Grantor dated October 5,
1994, as amended or restated, and recorded in the Routt County Clerk and
Recorder's office on October 6, 1994, in Book 701 at Page No. 1795, a first
amendment to deed of trust from Grantor to Beneficiary dated February 27, 1995,
and recorded in the Routt County Clerk and Recorder's office on March 22, 1995
in Book 706 at Page 339, a second amendment to deed of trust from Grantor to
Beneficiary dated November 29, 1996, and recorded in the Routt County Clerk and
Recorder's office on December 20, 1996 in Book 728 at Page 320, and as further
amended or restated (herein, the "Deed of Trust"), and other deeds of trust and
collateral as described in the Loan Agreement.
C. The Loan is guaranteed by Mego Financial Corp., a New York
corporation ("Guarantor"), in accordance with that certain Guaranty Agreement
dated of even date herewith
1
22
(the "Guaranty"). The indebtedness secured by the Deed of Trust is guaranteed by
Borrower, in accordance with a guaranty agreement dated on or about the date of
the Deed of Trust.
D. Borrower is a wholly-owned subsidiary corporation of Guarantor.
Grantor is a wholly-owned subsidiary corporation of Borrower. It is of material
and substantial benefit to Guarantor and Grantor that the Loan be made to
Borrower, and Grantor acknowledges that it has received full and adequate
consideration for the incurrence by it of the additional obligations to
Beneficiary as set forth in this Amendment.
E. This Amendment is a "Loan Document" as defined in the Loan Agreement.
F. Grantor and Beneficiary now wish to amend the Deed of Trust to
provide that it is cross-defaulted to and cross-collateralized with the
obligations of Borrower with respect to the Loan and any other indebtedness and
obligations of Borrower to Beneficiary or Lender, and to and with the
obligations of Steamboat Suites, Inc., a Colorado corporation, with respect to
all indebtedness and other obligations of Steamboat Suites, Inc. to Beneficiary.
AGREEMENT
Therefore, Grantor and Beneficiary agree as follows:
1. Recitals. The recitals set forth above in the Factual Background are
true, accurate and correct.
2. Reaffirmation of Deed of Trust. Grantor reaffirms all of its
obligations under the Deed of Trust, and Grantor acknowledges that it has no
claims, offset or defenses with respect to the payment of any sum due under the
Deed of Trust or any other loan documents, promissory notes or other agreements
of any kind evidencing any indebtedness of Grantor to Beneficiary to which it is
a party.
3. Amendment. The Deed of Trust is hereby amended as follows:
(a) The occurrence of a breach, default or event of default
under or with respect to the Loan and any Loan Document after expiration
of any applicable grace period shall be an Event of Default under this
Deed of Trust, dated October 5, 1994, as amended or restated, and
recorded in the Routt County Clerk and Recorder's office on October 6,
1994, in Book 701 at Page No. 1795, as amended by a first amendment to
deed of trust from Grantor to Beneficiary dated February 27, 1995, and
recorded in the Routt County Clerk and Recorder's office on March 22,
1995 in Book 706 at Page 339, as further amended by a second amendment
to deed of trust from Grantor to Beneficiary dated November 29, 1996,
and recorded in the Routt County Clerk and Recorder's office on December
20, 1996 in Book 728 at Page 320, and as amended by that certain Third
Amendment to Combination Deed of
2
23
Trust, Security Agreement and Fixture Filing dated as of August 12,
1998, between Grantor and Beneficiary.
(b) The lien of this Deed of Trust shall secure all indebtedness
and other obligations of Preferred Equities Corporation, with respect to
the Loan and any other indebtedness and obligations of Preferred
Equities Corporation to Beneficiary or Lender, and to and with all
indebtedness and other obligations of Steamboat Suites, Inc., a Colorado
corporation, to Beneficiary.
4. Conditions Precedent. Before this Amendment becomes effective and any
party becomes obligated under it, all of the following conditions shall have
been satisfied at Grantor's sole cost and expense in a manner reasonably
acceptable to Beneficiary:
(a) Beneficiary shall have received fully executed and
acknowledged originals of this Amendment, the attached consents signed
by Guarantor and Borrower, as borrower and guarantor, and any other
documents which Beneficiary may require or request in accordance with
this Amendment or the other Loan Documents.
(b) Beneficiary shall have received reimbursement (or in lieu
thereof, shall have retained Loan proceeds in a sufficient amount to
cover such costs and expenses), in immediately available funds, of all
costs and expenses incurred by Beneficiary in connection with this
Amendment, including charges for title insurance (including
endorsements), recording, filing and escrow charges, fees for appraisal
services, and legal fees and expenses of Beneficiary's or Lender's
counsel. Such costs and expenses may include the actual costs for
services for Beneficiary's or Lender's in-house staffs, such as legal
and appraisal services.
5. Grantor's Representation and Warranties. Grantor represents and
warrants to Beneficiary as follows:
(a) Accuracy. All representations and warranties made and given
by Grantor herein are true, accurate and correct.
(b) No Default. No Default or Event of Default has occurred and
is continuing under the Deed of Trust or this Amendment, and no event
has occurred and is continuing which, with notice or the passage of time
or both, would be a Default or Event of Default.
(c) Property. Grantor continues to lawfully possess and hold fee
simple title to the property encumbered by the Deed of Trust, as amended
by this Amendment, and the Deed of Trust as amended is a first and prior
lien on that property, subject to permitted exceptions to title approved
by Beneficiary.
6. No Prejudice: Reservation of Rights. This Amendment shall not
prejudice any rights or remedies of Beneficiary or Lender under the Loan
Documents. Each of Beneficiary and Lender
3
24
reserves, without limitation, all rights which it has against any indemnitor,
guarantor, or endorser of the promissory note secured by the Deed of Trust.
7. No Impairment. Except as specifically hereby amended, the Deed of
Trust shall remain unaffected by this Amendment, and the Deed of Trust shall
remain in full force and effect. Nothing in this Amendment shall impair the
liens of the Deed of Trust, which shall remain a deed of trust with the power of
sale, creating a first lien(s) encumbering the property described therein,
subject to permitted exceptions to title approved by Beneficiary.
8. Disclosure to Title Company. Without notice to or the consent of
Grantor, Beneficiary may disclose to any title insurance company which insures
any interest of Beneficiary under the Deed of Trust, as amended hereby (whether
as primary insurer, coinsurer or reinsurer) any information, data or material in
Beneficiary's possession relating to Grantor, the indebtedness secured by the
Deed of Trust, as amended hereby, and/or the property secured by the Deed of
Trust.
9. Miscellaneous. If any court of competent jurisdiction determines any
provision of this Amendment to be invalid, illegal or unenforceable, that
portion shall be deemed severed from this Amendment, which shall remain in full
force and effect as though the invalid, illegal or unenforceable portion had
never been a part hereof. This Amendment shall be governed by the laws of the
State of Colorado, without regard to the choice of law rules of that State. As
used here, the word "includes(s)" means "Include(s), without limitation", and
the word "including" means "including, but not limited to."
GRANTOR:
STEAMBOAT SUITES, INC., a Colorado corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Title: President
---------------------------------------
BENEFICIARY:
TEXTRON FINANCIAL CORPORATION, a
Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
4
25
STATE OF NEVADA
COUNTY OF ▇▇▇▇▇
This instrument was acknowledged before me on August 12, 1998 by ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ as President of Steamboat Suites, Inc., a Colorado corporation.
/s/ ▇▇▇▇ ▇. FAIR
[NOTARY PUBLIC SEAL] ------------------------------------
Notary Public
My commission expires: Oct. 30, 1998
STATE OF ____________
COUNTY OF ___________
This instrument was acknowledged before me on ________________, 1998 by
_______________ as ______________ of Textron Financial Corporation, a Delaware
corporation.
------------------------------------
Notary Public
My commission expires: _____________
26
CONSENTS
The undersigned hereby consent to the terms, conditions and provisions
of the foregoing Third Amendment to Combination Deed of Trust, Security
Agreement and Fixture Filing and the transactions contemplated by it. Guarantor
hereby affirms the full force and effectiveness of its guaranty agreement and
obligations thereunder with respect to any indebtedness and obligations of
Grantor and Borrower guaranteed by Guarantor. Borrower hereby affirms the full
force and effectiveness of its obligations to Lender under the Loan Documents
and its guaranty agreement and obligations with respect to any indebtedness and
obligations of Grantor to Beneficiary guaranteed by Borrower.
Dated: August 12, 1998
ACKNOWLEDGED:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Title: President
-------------------------------
ACKNOWLEDGED BY GUARANTOR:
MEGO FINANCIAL CORPORATION,
a New York corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
-------------------------------
6
27
STATE OF NEVADA
COUNTY OF ▇▇▇▇▇
This instrument was acknowledged before me on August 12, 1998 by ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ as President of Preferred Equities Corporation, a Nevada corporation.
/s/ ▇▇▇▇ ▇. FAIR
[NOTARY PUBLIC SEAL] ------------------------------------
Notary Public
My commission expires: Oct. 30, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
This instrument was acknowledged before me on August 12, 1998 by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ as Vice President of Mego Financial Corporation, a New York
corporation.
/s/ ▇▇▇▇ ▇. FAIR
[NOTARY PUBLIC SEAL] ------------------------------------
Notary Public
My commission expires: Oct. 30, 1998
28
EXHIBIT "E"
LITIGATION REPORT
1. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ vs. MEGO MORTGAGE CORPORATION, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, AND MEGO
FINANCIAL CORP.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Case No. 1:98CV0593-CAM; filed February 23, 1998
On February 23, 1998, an action was filed in the United States District
Court of Georgia, Civil Action No. 1:98CV0593-CAM by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
plaintiff, as a purported class action against Mego Mortgage Corporation
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the former President and Chief Executive Officer of
Mego Mortgage Corporation. The complaint alleges, among other things, that
the defendants violated the federal securities laws in connection with the
preparation and issuance of certain Mego Mortgage Corporation's financial
statements. The named plaintiff seeks to represent a class consisting of
purchasers of the common stock of Mego Mortgage Corporation between April
11, 1997 and December 18, 1997, and seeks other such relief as the Court
may deem just and proper. Mego Financial Corp. ("the Company") was served
on July 30, 1998 with an amended complaint which, among other things, adds
Mego Financial Corp. as a defendant, adds ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as plaintiffs and alleges an expansion
of the purported class to certain purchaser's of Mego Mortgage
Corporation's common stock from April 11, 1997 through May 20, 1998. The
Company's counsel have not completed their review of the above matter;
however, the Company was not the parent company of Mego Mortgage
Corporation at the time when the matters which are cited in the
above-described action occurred. The Company does not believe that any
judgment obtained will have a material adverse effect on the Company's or
Preferred Equities Corporation's business or financial condition.
2. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ vs. PREFERRED EQUITIES CORPORATION a.k.a. CALVADA SPRINGS
CORPORATION
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇; filed March 26, 1997 and served March 31, 1997
The Plaintiff filed this personal injury lawsuit on March 26, 1997 and is
seeking (i) general damages in excess of $10,000 and (ii) special damages
in excess of $10,000 for medical expenses, loss of income/wages,
attorneys' fees, costs of suit and interest allowed by law. The suit is
based on a third party assault and battery upon Plaintiff while entering
upon Defendant's property. The assailant was not an employee, agent or
servant of the Defendant. The Defendant's insurance carrier has accepted
the case for insurance defense, subject to the limits of the Defendant's
comprehensive general liability insurance policy maintained with Reliance
Insurance Company ("Policy"). The Policy provides $1MM coverage per
occurrence and $2MM aggregate coverage for all occurrences. In
1.
29
this connection, Defendant also maintains a supplemental umbrella liability
insurance policy with Federal Insurance Company ("Umbrella Policy") for
$20MM additional coverage for any amounts exceeding the $2MM Policy limit,
or an aggregate of $22MM combined insurance coverage. The Company is of
opinion that (i) the case is fully insured (ii) the Company has valid
defenses and (iii) any judgement obtained will not have a material adverse
effect on the Company's business or financial condition.
3. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ vs. PREFERRED EQUITIES CORPORATION d.b.a.
RAMADA VACATION SUITES
District Court, ▇▇▇▇▇ County, Nevada
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇; filed December 9, 1997 and served January 15, 1998.
The Plaintiffs' filed this personal injury lawsuit on December 9, 1997 and
are seeking (i) general damages in excess of $10,000 and (ii) special
damages in excess of $10,000 for medical expenses, loss of income/wages,
emotional distress and (iii) punitive damages in excess of $10,000, plus
attorneys' fees and costs of suit. The suit is based on a third party
assault and battery upon Plaintiff ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the presence of his
wife, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, while entering upon Defendant's property. The
assailants were not employees, agents or servants of Defendant. The
Defendant's insurance carrier, Reliance Insurance Company, has accepted the
case for insurance defense, subject to the limits of the comprehensive
general liability policy ("Policy"). In this connection, Defendant also
maintains a supplemental umbrella liability insurance policy with Federal
Insurance Company for $20 MM additional coverage for any amounts exceeding
the $2 MM limits of the Policy or an aggregate of $22 MM combined insurance
coverage. The Company is of opinion that (i) the case is fully insured (ii)
the Company has valid defenses and (iii) any judgement obtained will not
have a material adverse effect on the Company's business or financial
condition.
4. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ vs. PREFERRED EQUITIES CORPORATION
District Court, Washoe County, Nevada
Case No. CV-N-98-00307-HDM; filed June 8, 1998 and served June 15, 1998
Plaintiff filed suit under Title VII of the 1964 Civil Rights Act.
Plaintiff alleges sexual harassment and an offensive work environment.
Plaintiff seeks damages in the amount of $300,000.00. Defense of this
matter has been tendered to the company's insurance carrier. The Company is
of opinion that the case is insured.
5. ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ vs. WHITE SANDS RAMADA INN RESORTS and
▇▇▇▇▇ VILIMORE
First Circuit Court, State of Hawaii
Civil No. ▇▇-▇▇▇▇-▇▇
Plaintiff filed suite alleging negligence. Plaintiff was illegally parked
in a handicapped
2.
30
parking space. Plaintiff suffered heart pains when told to move his
vehicle and has sued for negligence. Plaintiff has offered to settle for
$5,000.00. The case has been referred to the Company's insurance defense
carrier and is fully insured.
6. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ vs. PREFERRED EQUITIES CORPORATION d.b.a. RAMADA VACATION
SUITES
District Court, ▇▇▇▇▇ County, Nevada
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇; filed June 19, 1998 and served on June 24, 1998
Plaintiff filed suit alleging negligence. After swimming Plaintiff slipped
and fell when exiting the Defendant's swimming pool located at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇. Plaintiff sustained injury to his shoulder and
has sued Defendant for negligence. Plaintiff seeks general damages in
excess of $10,000. The case has been referred to Defendant's insurance
carrier for insurance defense. The Company is of opinion the case is fully
insured.
3.
31
PROMISSORY NOTE
$4,000,000.00 Las Vegas, Nevada
Funding Date: The date funds August 12, 1998
are wire transferred by Lender
FOR VALUE RECEIVED and pursuant to the terms of this Promissory Note
("Note"), the undersigned, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Maker") promises to pay to the order of DORFINCO CORPORATION, a Delaware
corporation ("Lender") (the Lender and all subsequent holders of this Note being
hereinafter referred to as the "Holder") at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Accounting Department, or at such other place as
the Holder hereof may designate in writing, the principal sum of up to Four
Million and no/100 Dollars ($4,000,000.00), or so much as may be outstanding
hereunder from time to time (the "Loan"), together with interest on the unpaid
principal balance of such indebtedness from time to time outstanding, at the
rate or rates hereinafter set forth.
1. SECURITY.
The payment of this Note and all interest, fees and charges herein is
evidenced and/or secured by (a) a first lien Deed of Trust, Security Agreement
and Fixture Filing ("Deed of Trust") by Maker for the benefit of Lender, of even
date herewith encumbering certain real property (the "Property") located in the
County of ▇▇▇, State of Nevada, and described more particularly on Exhibit "A"
to the Deed of Trust; (b) certain other real and personal property and owned by
Maker or its subsidiaries, encumbered by certain deeds of trust, or security
agreements, as amended, described on Exhibit "B" to the Loan Agreement (as
defined herein); (c) a Loan and Security Agreement ("Loan Agreement") of even
date herewith between Maker as borrower and Lender as lender; and (d) such other
documents which recite that they evidence, relate to or have been given as
security for this Note (all the aforementioned documents shall herein be
referred to as "Security Documents").
2. INTEREST RATE.
1. On and after the Funding Date (until maturity or default as hereinafter
provided), interest shall accrue and be due monthly in arrears at the rate per
annum of three percent (3%) above the "Prime Rate" as announced by Chase
Manhattan Bank, N.A. or the successor thereto (the "Basic Interest Rate"), with
the Basic Interest Rate for any given calendar month being calculated by using
the Prime Rate in effect on the first (1st) day of each month during the term
hereof, provided, however, the Basic Interest Rate shall not be less than ten
and one-half percent (10.5%) per annum at any time during the original term of
this Note and any extension. In the event Chase Manhattan Bank, N.A., or any
successor thereto, shall discontinue announcement of said Prime Rate, a
comparable index designated by Holder shall be used in calculating the Basic
Interest Rate. Interest
1
32
under this Note shall be calculated based on the actual number of days of
interest accrual using a year of 360 days.
2. (a) Interest that will accrue for the period commencing with the
Funding Date and continuing through August 31, 1998 at the Basic Interest Rate
on the principal sum advanced shall be paid on the first day of the first full
month after the Funding Date.
(b) Commencing on the first (1st) day of September, 1998 and
continuing on the first (1st) day of each and every month thereafter through and
including the Maturity Date or the Extended Maturity Date (as defined below), as
applicable, all interest accrued at the Basic Interest Rate shall be due and
payable monthly in arrears.
(c) Unless the term of this Note is extended as provided below, on
August 31, 1999 (the "Maturity Date"), or on such earlier date as this Note
becomes due and payable, whether by acceleration or otherwise, the entire
outstanding principal balance hereof, together with accrued but unpaid interest
thereon, and all other sums owing to Holder hereunder or under the Security
Documents, shall be due and payable in full.
3. APPLICATION OF PAYMENT.
All principal, interest and any other amounts due under this Note shall be
payable in lawful money of the United States of America at the place or places
above stated. All payments shall be credited first to costs and expenses, if
any, incurred by Holder in collecting any amounts due hereunder, second to any
Late Charges (as hereinafter defined) and interest accrued at the Default Rate,
third to past due interest, and fourth to principal and any other amounts due
hereunder or under the Security Documents.
4. EXTENSION.
The term of the Loan may be extended at the option of the Maker for an
additional one (1) year period (the "Extended Term") (the last day of the
Extended Term shall be the "Extended Maturity Date") in accordance with and
subject to the following terms and conditions: (a) there shall have been no
monetary default whatsoever of any kind that extended beyond any cure period
during the initial term of the Loan (including, but not limited to, non-payment
of taxes and insurance premiums) and there shall have been no non-monetary
default which remains uncured at the time of Maker's election to extend the term
of the Loan; (b) there has been no material adverse change in the Property or in
the business or financial condition of Maker that would adversely affect its
ability to perform according to the Security Documents; (c) Maker may only
exercise the option to extend the term of the Loan by giving written notice to
Holder not less than thirty (30) days prior to the expiration of the initial
term of the Loan, together with the payment of an extension fee in the amount of
one and one-half percent (1.5%) of the then outstanding balance of the Loan; (d)
interest will accrue on all principal outstanding hereunder throughout the
Extended Term at the Basic Interest Rate; (e) during the Extended Term, monthly
payments shall be made in arrears equal to the interest
2
33
accrued at the Basic Interest Rate plus fixed principal payments in the
following amounts and on the following dates:
(i) On November 30, 1999, an installment of principal in an
amount necessary and sufficient to cause the total outstanding
principal balance remaining under the Note to be Three Million
Dollars ($3,000,000.00) or less;
(ii) On February 28, 2000, an installment of principal in an
amount necessary and sufficient to cause the outstanding
principal balance remaining under the Note to be Two Million
Dollars ($2,000,000.00) or less;
(iii) On May 31, 2000, an installment of principal in an
amount necessary and sufficient to cause the outstanding
principal balance remaining under the Note to be One Million
Dollars ($1,000,000.00); and
(iv) On the Extended Maturity Date, which is August 31, 2000,
the entire outstanding principal balance of the Loan, plus all
accrued and unpaid interest thereon and any other amounts then
due and payable under the Note or any of the Loan Documents
shall be due and payable;
(f) Maker shall provide Holder with an updated title insurance endorsement and
such other documentation and evidence reasonably requested by Holder, to confirm
Holder's lien position and other interests under the Security Documents; and (g)
Maker shall pay, prior to the commencement of the Extended Term, all expenses
incurred by Holder for which Maker is billed prior and in connection with the
extension, whether or not it is consummated, unless failure to consummate the
extension is attributable to the sole fault of Holder.
5. LATE PAYMENT CHARGES.
In the event that any monthly payment is not received at the above said
address (or at such other place as is designated pursuant to the terms hereof)
before the tenth (10th) day after the due date thereof, in addition to any other
permitted charges hereunder, a one-time late payment fee ("Late Charge") shall
be due and owing to Holder in the amount of five percent (5%) of each monthly
payment as it becomes past due and, if the Note has been accelerated, an
additional five percent (5%) of the accelerated balance if not paid when due.
Holder shall have no obligation to accept any payments hereunder not accompanied
by all outstanding late payment fees. Notwithstanding anything contained herein
or in any Security Document, this paragraph is not intended to, and shall not,
create any grace period or indulgence by Holder with respect to the punctual
payment by Maker of all sums owed Holder, nor shall this paragraph in any way
hinder, prevent or delay Holder from exercising any remedy which it may have
hereunder or under any Security Document, or at law or in equity, with respect
to Maker's failure timely to make any payment when due. Maker acknowledges that
the Late Charge is not imposed as a charge for the use
3
34
of money, but rather is imposed to permit Holder to recoup its administrative
charges and other costs in dealing with loans not paid on time, and the Late
Charge shall in no way be deemed an interest charge.
6. INTEREST UPON DEFAULT.
In the event that any payment of principal, interest, Late Charge or any
prepayment premium under this Note is not paid before the tenth (10th) day after
its due date, whether or not by reason of acceleration, and/or if there occurs a
default under the Security Documents, or in or under any other document or
instrument evidencing, securing, or otherwise relating to the indebtedness
evidenced hereby, which default is not cured within the applicable notice and/or
grace period, if any, expressly provided therefor, such failure shall constitute
a default hereunder, and such amount shall bear interest from the due date
thereof until paid at the rate of five percent (5%) per annum in excess of the
Basic Interest Rate (the "Default Rate").
7. ACCELERATION.
In the event of any default by Maker hereunder or under the Security
Documents, and after the expiration of any applicable cure periods specified
hereunder or under the Security Documents, Holder may at its option, in addition
to any other remedies to which it may be entitled, declare the total unpaid
principal balance of the indebtedness evidenced hereby, together with all
accrued but unpaid interest thereon and all other sums owing, immediately due
and payable and all such amounts shall thereafter bear interest at the Default
Rate; provided, however, the Default Rate shall not accrue on any Late Charges.
All such interest shall be paid at the time of and as a condition precedent to
the curing of any default should Holder, in its sole discretion, allow such
default to be cured. Time is of the essence in this Note.
8. PREPAYMENT.
(a) The Loan may be prepaid at any time, in whole or in part, without
penalty or premium, upon thirty (30) days prior written notice to Holder, and
upon payment, in addition to such outstanding principal amount, all accrued and
unpaid interest and all other amounts due hereunder shall be paid.
(b) Notwithstanding anything in this Note or any Security Document to the
contrary, no prepayment premium shall be charged with respect to the proceeds of
any insurance policy or condemnation which are applied by Holder to the
principal balance of this Note and any such application of insurance or
condemnation proceeds shall be deemed a permitted prepayment hereunder.
9. LIMIT OF VALIDITY.
All agreements between the Maker and the Holder hereof are expressly
limited so that in no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof,
4
35
acceleration of maturity of the unpaid principal balance hereof, or otherwise,
shall the amount paid or agreed to be paid to the Holder hereof for the use,
forbearance or detention of the money to be advanced hereunder exceed the
highest lawful rate permissible under applicable usury laws. If, from any
circumstances whatsoever fulfillment of any provision hereof or of the Security
Documents shall involve transcending the limit of validity prescribed by any law
which a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and, if from any circumstance the Holder hereof shall ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance due hereunder and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Maker and the Holder hereof.
10. MISCELLANEOUS.
(a) Any remittances hereunder by check or draft shall be credited on the
date of receipt subject to the condition that such check or draft may be handled
for collection in accordance with the practice of the collecting bank or banks
and any receipt issued therefore shall be void unless the amount due is actually
received by Holder hereof.
(b) If interest, principal or other sum owing under this Note is not paid
when due, after giving effect to any applicable grace period, whether at
maturity or by acceleration, the Maker promises to pay all reasonable costs of
collection, including but not limited to, attorneys' fees and all expenses
incurred by the Holder in connection with the collection of this Note, the
protection or realization of the collateral and enforcement of any guaranty on
account of such collection, whether or not suit is filed hereon. Such fees shall
include, without limitation, costs and attorneys' fees incurred in any appeal.
(c) Maker and all sureties, endorsers, guarantors and all other parties
now or hereafter liable for the payment of this Note, in whole or in part,
hereby severally waive presentment for payment, demand and protest and notice of
protest, acceleration, or dishonor and non-payment of this Note, and expressly
consent to any extension of time of payment hereof or of any installment hereof,
to the release of any party liable for this obligation, to the release, change
or modification of any collateral posted as security for the payment of this
Note, and any such extension, modification or release may be made without notice
to any of said parties and without in any way affecting or discharging this
liability, provided Maker must consent to any change or modification of
collateral.
(d) No single or partial exercise of any power hereunder shall preclude
other or further exercise thereof or the exercise of any other power. The Holder
hereof shall at all times have the right to proceed against any portions of
security held herefor in such order and in such manner as the Holder may deem
fit, without waiving any rights with respect to any other security. No delay or
omission on the part of Holder hereof in exercising any right or remedy
hereunder or the acceptance of one or more installments from any person after a
default hereunder or under the Security Documents shall operate as a waiver of
such right or remedy or of any other right or remedy under this Note nor as a
waiver of such right or remedy in connection with any future default.
5
36
(e) If more than one person has executed this Note or becomes obligated
under this Note, the obligations and covenants of each such person shall be
joint and several. The release by Holder of any party liable on this Note shall
not operate to release any other party liable hereon.
(f) In the event any one or more of the provisions contained in this Note
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Note, but this Note shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(g) All notices hereunder shall be deemed to have been duly given if
delivered in accordance with the provisions set forth in Paragraph 3.07 of the
Deed of Trust; references to notice provisions contained therein relating to (i)
the Grantor thereunder shall be applicable to Maker, and (ii) the Beneficiary
thereunder shall be applicable to Holder.
(h) This Note may not be waived, changed, modified or discharged orally,
except by an agreement in writing signed by the party against whom the
enforcement of waiver, change, modification or discharge is sought.
(i) The underlined words appearing at the commencement of the paragraphs
are included only as a guide to the contents thereof and are not to be
considered as controlling, enlarging or restructuring the language or meaning of
those paragraphs.
(j) As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective heirs, successors, legal representatives and assigns,
whether voluntary, by action of the parties, or involuntary by operation of law.
(k) This Note is to be governed by and construed in accordance with the
laws of the State of Rhode Island without regard to conflict of laws principles;
provided, however, that the laws of the State of Nevada shall apply with respect
to the procedural and substantive requirements of Nevada real property and
personal property law with request to any foreclosure or other action to realize
all real and personal property collateral security for the Loan. Subject to the
foregoing proviso, the Maker hereby consents to the non-exclusive personal
jurisdiction of the federal and state courts located in Providence County, Rhode
Island in any and all actions between the Maker and the Holder arising under or
in connection with this Note, the Loan or any of the Security Documents.
FOR AND IN CONSIDERATION OF HOLDER'S ADVANCEMENT OF THE PRINCIPAL SUM HEREUNDER
IN THE AMOUNT OF $4,000,000.00, THE MAKER, BEING AN EXPERIENCED DEVELOPER AND
PARTICIPANT IN SOPHISTICATED REAL ESTATE VENTURES, AND HAVING CONSULTED WITH
COUNSEL OF ITS CHOOSING, HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT
TO ANY ACTION OR PROCEEDING (I) BROUGHT BY THE MAKER, THE HOLDER OR ANY OTHER
PERSON RELATING TO (A) THE LOAN OR (B) THE SECURITY DOCUMENTS, OR (II) TO WHICH
THE HOLDER IS A PARTY. THE MAKER HEREBY AGREES THAT THIS NOTE CONSTITUTES A
WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY, AND THE MAKER DOES HEREBY CONSTITUTE
AND
6
37
APPOINT THE HOLDER ITS TRUE AND LAWFUL ATTORNEY-IN-FACT, WHICH APPOINTMENT IS
COUPLED WITH AN INTEREST, AND THE MAKER DOES HEREBY AUTHORIZE AND EMPOWER THE
HOLDER, IN THE NAME, PLACE AND STEAD OF THE MAKER, TO FILE THIS NOTE WITH THE
CLERK OR JUDGE OF ANY COURT OF COMPETENT JURISDICTION AS A STATUTORY WRITTEN
CONSENT TO WAIVER OF TRIAL BY JURY. THE MAKER ACKNOWLEDGES THAT ITS WAIVER OF
TRIAL BY JURY HAS BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY MAKER AS
PART OF A BARGAINED FOR LOAN TRANSACTION.
EXECUTED as a sealed document as of the day and year first above written.
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Title: President
---------------------------------------
7
38
STATE OF NEVADA
UNIFORM COMMERCIAL CODE -- FINANCING STATEMENT -- FORM UCC-1
This FINANCING STATEMENT is presented for filing pursuant to the
Nevada Uniform Commercial Code
IMPORTANT: Read Instructions on back before filling out form Receipt No.___
--------------------------------------------------------------------------------
1. DEBTOR (ONE NAME ONLY)
[X] LEGAL BUSINESS NAME Preferred Equities Corporation
[ ] INDIVIDUAL (LAST NAME FIRST)
--------------------------------------------------------------------------------
1A. SOCIAL SECURITY OR FEDERAL TAX NO.
--------------------------------------------------------------------------------
1B. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇ CODE
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
1E. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ZIP CODE
--------------------------------------------------------------------------------
2. ADDITIONAL DEBOT (IF ANY) (ONE NAME ONLY)
[ ] LEGAL BUSINESS NAME
[ ] INDIVIDUAL (LAST NAME FIRST)
--------------------------------------------------------------------------------
2A. SOCIAL SECURITY OR FEDERAL TAX NO.
--------------------------------------------------------------------------------
2B. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇ CODE
--------------------------------------------------------------------------------
2E. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ZIP CODE
--------------------------------------------------------------------------------
3. [ ] ADDITION DEBTOR(S) ON ATTACHED SHEET
--------------------------------------------------------------------------------
4. SECURED PARTY
NAME DORFINCO CORPORATION
MAILING ADDRESS ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ZIP CODE 02940
--------------------------------------------------------------------------------
4A. SOCIAL SECURITY NO. FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
--------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY)
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
--------------------------------------------------------------------------------
5A. SOCIAL SECURITY NO. FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
--------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types of items of property (if
crops or timber, include description of real property on which growing or to
be growing and name of record owner of such real estate; if fixtures,
description of real property to which affixed or to be affixed and name of
record owner of such real estate; if oil, gas or minerals, include
description of real property from which to be extracted).
See Exhibit "A" and "B" attached hereto and hereby incorporated herein
by this reference.
6A. ______________________________ 6C. $________________________________
SIGNATURE OF RECORD OWNER MAXIMUM AMOUNT OF INDEBTEDNESS
TO BE SECURED AT ANY ONE TIME
6B. ______________________________ (OPTIONAL)
(TYPE) RECORD OWNER OF
REAL PROPERTY
--------------------------------------------------------------------------------
7. CHECK IF APPLICABLE [X]
A. [X] Proceeds of collateral are also covered
B. [ ] Products of collateral are also covered
C. [ ] Proceeds of above described original collateral in which a
security interest was perfected (Debtor's Signature Not Required)
D. [ ] Collateral was brought into this State subject to security interest
in another jurisdiction (Debtor's Signature Not Required)
--------------------------------------------------------------------------------
8. CHECK IF APPLICABLE [X]
[ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH NRS 704.205
AND NRS 104.9403.
--------------------------------------------------------------------------------
9. (Date) August 12 1998
-----------------------------
Preferred Equities Corporation
By /s/ [SIG] President
---------------------------------------------------------------------------
SIGNATURE(S) OF DEBTOR(S) (TITLE)
---------------------------------------------------------------------------
DORFINCO CORPORATION TYPE NAME(S)
By
---------------------------------------------------------------------------
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
---------------------------------------------------------------------------
TYPE NAME(S)
--------------------------------------------------------------------------------
10. Return Copy to:
NAME ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-▇▇▇▇, Division Counsel TRUST
ADDRESS Textron Financial Corporation ACCOUNT
CITY, STATE ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ NUMBER
AND ZIP Providence, Rhode Island 02940 (If Applicable)
----------
--------------------------------------------------------------------------------
11. This Space for Use of Filing Officer: (Date, Time, File Number
and Filing Officer)
--------------------------------------------------------------------------------
39
Debtor: Preferred Equities Corporation
Secured Party: DORFINCO CORPORATION
Item 6 - continued
EXHIBIT "A"
This Financing Statement covers all of Debtor's interest in and to the
following, whether now existing or hereafter coming into existence, and all
substitutions, replacements, renewals and additions thereto or thereof:
(a) all interests in land, estates, easements, rights, improvements,
property, fixtures, equipment, furniture, furnishings, appliances
and appurtenances, of every nature whatsoever (collectively, the
"Premises") now or hereafter situated on the real estate described
on Exhibit "B" hereto (the "Land");
(b) all construction materials, vaults, gas, electric and other utility
fixtures, radiators, heaters, engines, machinery, boilers, ranges,
elevators, plumbing and heating fixtures, draperies, carpeting and
other floor coverings, fire extinguishers and any other safety
equipment, washers, dryers, water heaters, water fountains, mirrors,
mantels, air conditioning apparatus, refrigerating plants,
refrigerators, cooking apparatus and appurtenances, window screens,
awnings and storm sashes, which are or shall be attached to said
buildings, structures or improvements and all other furnishings,
furniture, goods which are or are to become fixtures, machinery,
equipment, inventory, supplies, appliances, and tangible personal
property of every kind and nature whatsoever now or hereafter owned
by Debtor and located in, on or about, or used or intended to be
used with or in connection with the use, operation or enjoyment of
the Land and the improvements thereon, and all attachments,
additions, improvements, after-acquired property, renewals, proceeds
and replacements of any of the foregoing and all the right, title
and interest of Debtor in any of the foregoing property which is
subject to or covered by any conditional sales contract, chattel
mortgage or similar lien or claim, together with the benefit of any
deposits or payments now or hereafter made by Debtor or on behalf of
Debtor with respect thereto, all of which are hereby declared and
shall be deemed to be fixtures and accessions to the freehold and a
part of the Premises as between the parties hereto and all persons
claiming by, through or under them, and which shall be deemed to be
a portion of the security for the indebtedness described in and to
be secured by, among other things, that certain Loan and Security
Agreement (the "Loan Agreement") dated as of August 12, 1998,
between Secured Party as lender and Debtor as borrower, and that
certain Deed of Trust and Security Agreement and Fixture Filing (the
"Deed") dated as of August 12, 1998, by and among Debtor, as
grantor, United Title of Nevada, a Nevada corporation, as trustee
and Secured Party, as beneficiary;
1
40
(c) all now owned or hereafter acquired easements, rights-of-way,
strips, gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water rights and powers, and all
estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances whatsoever, in any way
belonging, relating or appertaining to the Premises or any part
thereof, or which hereafter shall in any way belong, relate or be
appurtenant thereto, and the reversions, remainders, rents, issues,
profits, revenues, accounts, contract rights and general intangibles
of or arising from the Premises (including without limitation all
payments under room occupancy agreements, all leases or tenancies,
proceeds of insurance, prepaid insurance premiums, condemnation
payments, tenant security deposits, escrow funds and payments from
motel guests), and all the estate, right, title, interest, property,
possession, claim and demand whatsoever at law, as well as in
equity, of Debtor of, in and to the same;
(d) any and all leases, subleases, rental agreements, occupancy
agreements, licenses, concessions, entry fees, other agreements
which grant a possessory interest in all or any part of the
Premises, together with all rents, issues, profits, revenues,
proceeds, awards, accounts, security deposits and other benefits now
or hereafter arising from the use and enjoyment of the Land and
improvements thereon or any part thereof;
(e) all other personal property in any way connected with the use or
enjoyment of the Premises; and
(f) all proceeds of any of the foregoing.
2
41
Debtor: Preferred Equities Corporation
Secured Party: DORFINCO CORPORATION
Item 6 - continued
EXHIBIT "B"
Legal Description of Land
All that real property situated in the State of Nevada, County of ▇▇▇, bounded
and described as follows:
Parcel 1:
Lot One (1) Block One (1) of CALVADA VALLEY UNIT NO. 2 as shown by map recorded
October 5, 1970 as File No. 20291 in the Office of the County Recorder of ▇▇▇
County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 2:
Lot One hundred forty-eight (148) in Block Sixteen (16) of CALVADA VALLEY UNIT
NO. 6, as shown by map recorded February 5, 1973 as Document No. 36024 in the
Office of the County Recorder of ▇▇▇ County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 3:
Parcels One (1) and Three (3) of Parcel Map recorded May 24, 1983 as File No.
81177 and amended by Certificate of Amendment recorded June 14, 1983 as File No.
83144 and by Certificate of Amendment recorded December 12, 1983 as File No.
99135 and by Certificate of Amendment recorded March 16, 1992 as File No. 304864
of Official Records, ▇▇▇ County, Nevada.
Parcel 4:
Parcel Two (2) as shown by Parcel Map recorded April 26, 1994 as File No. 351410
of Official Records, ▇▇▇ County, Nevada.
3
42
Parcel 5:
Lot Forty (40) in Block Six (6) of AMENDED PLAT OF CALVADA VALLEY UNIT 6,
recorded December 28, 1993 as Document No. 345007 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
Lots Nineteen (19) and Nineteen A (19A) (to the extent of Preferred Equities
Corporation's reversionary interest in Lot Nineteen A (19A)) of Block Six (6) of
CALVADA VALLEY UNIT NO. 6, recorded February 5, 1973 as File No. 36024 of
Official Records, ▇▇▇ County, Nevada, more particularly described as Parcel
Nineteen (19) as shown on Parcel Map recorded January 6, 1983 as File No. 72610
of Official Records, ▇▇▇ County, Nevada.
Lot One (1) in Block Fifteen (15), Lots One hundred seventy-three (173) and One
hundred seventy-four (174) in Block Eleven (11) and Lot Three hundred
twenty-three (323) in Block Six (6) of CALVADA VALLEY UNIT NO. 6, as shown by
map recorded February 5, 1973 as Document No. 36024 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
4
▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Phone ▇▇▇-▇▇▇-▇▇▇▇
UNIFORM COMMERCIAL CODE -- FINANCING STATEMENT -- FORM UCC-1
THIS FINANCING STATEMENT IS PRESENTED FOR FILING PURSUANT TO THE
NEVADA UNIFORM COMMERCIAL CODE
IMPORTANT: READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM. RECEIPT NO. ____________________
====================================================================================================================================
1. DEBTOR 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
[X] LEGAL BUSINESS NAME Preferred Equities Corporation
[ ] INDIVIDUAL (LAST NAME FIRST)
------------------------------------------------------------------------------------------------------------------------------------
1B. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇ CODE
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
1E. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ZIP CODE
------------------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (ONE NAME ONLY) 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
[ ] LEGAL BUSINESS NAME
[ ] INDIVIDUAL (LAST NAME FIRST)
------------------------------------------------------------------------------------------------------------------------------------
2B. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇ CODE
------------------------------------------------------------------------------------------------------------------------------------
2E. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇. ZIP CODE
====================================================================================================================================
3. [ ] ADDITIONAL DEBTOR(S) ON ATTACHED SHEET
====================================================================================================================================
4. SECURED PARTY 4A. SOCIAL SECURITY NO. FEDERAL TAX NO.
NAME DORFINCO CORPORATION OR BANK TRANSIT AND A.B.A. NO.
MAILING ADDRESS ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ZIP CODE 02940
====================================================================================================================================
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO. FEDERAL TAX NO.
NAME OR BANK TRANSIT AND A.B.A. NO.
MAILING ADDRESS
CITY STATE ZIP CODE
====================================================================================================================================
6. This FINANCING STATEMENT covers the following types or items of property (if crops or timber, include description of real
property on which growing or to be growing and name of record owner of such real estate; if fixtures, include description of
real property to which affixed or to be affixed and name of record owner of such real estate; if oil, gas or minerals, include
description of real property from which to be extracted).
See Exhibit "A" and "B" attached hereto and hereby incorporated herein by this reference
[THIS SPACE FOR USE OF FILING OFFICER]
6a. _________________________________________________________ 6C. $________________________________________________________
SIGNATURE OF RECORD OWNER MAXIMUM AMOUNT OF INDEBTEDNESS TO
BE SECURED AT ANY ONE TIME (OPTIONAL)
6B. _________________________________________________________
(TYPE) RECORD OWNER OF REAL PROPERTY
====================================================================================================================================
7. Check A. [X] Proceeds of B. [ ] Products of C. [ ] Proceeds of above described D. [ ] Collateral was brought
if collateral collateral original collateral in which into this State subject
Applicable are also are also a security interest was to security interest in
[X] covered covered perfected (Debtor's Signature another jurisdiction
Not Required) (Debtor's signature Not
Required)
====================================================================================================================================
8. Check
if [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH NRS 704.205 AND NRS 104.9403.
Applicable
[X]
====================================================================================================================================
9. (Date) August 12, 1998 11. This Space for Use of Filing Officer: (Date, Time,
PREFERRED SECURITIES CORPORATION File Number and Filing Officer)
PRESIDENT
By /s/ [SIG]
________________________________________________________________
SIGNATURE(S) OF DEBTOR(S) TITLE
___________________________________________________________________
DORFINCO CORPORATION TYPE NAME(S)
By ________________________________________________________________
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
___________________________________________________________________
TYPE NAME(S)
========================================================================
RETURN COPY TO:
NAME ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-▇▇▇▇, Division Counsel TRUST
ADDRESS Textron Financial Corporation ACCOUNT
CITY, STATE ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ NUMBER
AND ZIP Providence, Rhode Island 02940 (IF APPLICABLE)
WHITE -- Alphabetical; PINK -- Acknowledgement;
_______________ GREEN -- Secured Party; BLUE -- Debtor.
44
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement") is entered into
as of the 12th day of August, 1998 by and between DORFINCO CORPORATION, a
Delaware corporation ("Indemnitee") and PREFERRED EQUITIES CORPORATION, a Nevada
corporation ("Indemnitor"). The parties hereto enter into this contract with
reference to the following facts:
A. Indemnitee has agreed to make a loan to Indemnitor in the amount of
Four Million and 00/100 Dollars ($4,000,000.00) (the "Loan"). The Loan is to be
evidenced by a Promissory Note (the "Note"), and the Note is to be secured by a
Deed of Trust, Security Agreement and Fixture Filing (the "Deed of Trust")
encumbering certain property located in the County of ▇▇▇, State of Nevada (such
property or any parcel or portion thereof is herein the "Property") as more
particularly described on Exhibit "A" attached hereto and incorporated herein by
this reference. The making of the Loan is subject to a condition precedent that
Indemnitor make and deliver this Indemnity Agreement to Indemnitee.
B. Indemnitor acknowledges that Indemnitee would not make the Loan in the
absence of this Agreement.
C. Indemnitor acknowledges that Indemnitee may sustain Losses (as defined
herein) both prior to and following a foreclosure of Indemnitee's security
interest in the Property pursuant to the Deed of Trust.
D. Indemnitor acknowledges and agrees that any amounts owed to Indemnitee
by Indemnitor pursuant to the provisions of this Agreement are not secured by
the Deed of Trust nor are they related in any manner to any amounts owed to
Indemnitee pursuant to the Note and that said liabilities shall survive and
continue to be of full force and effect notwithstanding a sale or foreclosure
conducted pursuant to the Deed of Trust, the making of a deed in lieu of
foreclosure in favor of Indemnitee or a transfer of any other interest in the
Property, whether by Indemnitor or Indemnitee or by any successor or assignee of
Indemnitor or Indemnitee.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Hazardous Substances. As used herein, "Hazardous Substance" means any
substance, material, element, compound, mixture, solution, waste, pollutant or
matter that may give rise to liability under (i) the Resource Conservation
Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984
(RCRA, 42 U.S.C. Sections 6901 et seq.); (ii) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (CERCLA, 42 U.S.C. Sections 9601 et.
seq.); (iii) the Clean Water Act (CWA, 33 U.S.C. Sections 1251, et seq.); (iv)
the Safe Drinking Water Act (14 U.S.C. Sections 1401, et seq.); (v) the Toxic
Substances Control Act (TSCA, 15 U.S.C. Sections 2601 et seq.); (vi) the
Hazardous Materials Transportation Act (49 U.S.C. Sections 1801, et seq.); (vii)
the Emergency Planning and Community Right to Know Act of 1986 (42 U.S.C.,
Sections 11001, et seq.);
1
45
(viii) the Clean Air Act (42 U.S.C. Sections 7401, et seq.); (ix) the Endangered
Species Act (16 U.S.C. Sections 1531, et seq.); (x) any regulations promulgated
pursuant to Items (i) - (ix) above; (xi) any similar local, state or federal
laws, rules, ordinances or regulations either in existence as of the date
hereof, or enacted or promulgated after the date of this Agreement, that concern
the management, control, storage, discharge, treatment, containment, removal
and/or transport of substances or materials that are or may become a threat to
public health or the environment; or (xii) any common law theory involving
materials or substances which are (or alleged to be) hazardous to human health
or the environment, based on nuisance, trespass, negligence, strict liability or
other tortious conduct (items (i) through (xi) are collectively referred to
herein as "Environmental Laws").
2. Indemnity. Indemnitor hereby agrees to indemnify, save, defend (at
Indemnitor's sole cost and expense) and hold harmless Indemnitee, Textron
Financial Corporation and Textron, Inc., and their respective officers,
directors, agents, and employees, and the successors and assigns of each of the
foregoing (all of such persons or entities being collectively referred to herein
as "Indemnified Persons" and each such reference shall refer jointly and
severally to each such person), from and against the full amount of any and all
Losses, except, however, to the extent that any such Losses are caused by the
gross negligence or wilful misconduct of Indemnitee, Textron Financial
Corporation and/or Textron, Inc. "Losses" shall mean any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs, expenses
and disbursements (including, but not limited to, all attorneys' fees and all
other professional or consultants' expenses incurred in investigating, preparing
for, serving as a witness in or defending against any action or proceeding,
whether actually commenced or threatened, which may be asserted against any
Indemnified Person), arising from, in respect of, as a consequence of, or in
connection with any of the following: (a) the removal of any Hazardous Substance
on or released from the Property, whether such removal is done or completed by
Indemnitor, Indemnitee, or any other person or entity and regardless of whether
or not such removal is rendered pursuant to a court order or the order of an
administrative agency; (b) claims asserted by any person or entity (including,
without limitation, any governmental agency or quasi-governmental authority,
board, bureau, commission, department, instrumentality or public body, court, or
administrative tribunal (a "Governmental Agency")), in connection with or in any
way arising out of the presence, storage, use, disposal, generation,
transportation, or treatment of any Hazardous Substance on, in or under the
Property, either prior to or after the date of this Agreement and either prior
to, during, or after the time that Indemnitor became owner of the Property; (c)
the violation or claimed violation of any Environmental Laws in regard to the
Property, whether such violation or claimed violation occurred prior to or after
the date of this Agreement and regardless of whether such violation occurred
prior to, during, or after the time that Indemnitor became owner of the
Property; or (d) the preparation of an environmental audit on the Property,
whether conducted or authorized by Indemnitor, Indemnitee, or a third party or
the implementation of any environmental audit's recommendations, provided,
however, that Indemnitee shall have had reasonable grounds to believe that an
environmental audit was justified due to such Indemnitee's reasonable belief as
to the presence or probable presence of any Hazardous Substance on the Property
and that such presence could give rise to a material adverse effect on the
Property or the ability of Indemnitor to
2
46
repay the Loan or perform its obligations with respect thereto. Nothing in this
Agreement shall be deemed to imply a right by Indemnitee to go onto the Property
except as specifically set forth herein or in any of the Security Documents.
3. Payments. Payments under this indemnity in respect of all Losses shall
be due and payable as such Losses are incurred. The Indemnified Person shall
provide Indemnitor notice of any claim that may result in a Loss with reasonable
promptness, and Indemnitor shall have the right to defend the same; provided,
however, that failure by an Indemnified Person to give such notice shall not
relieve Indemnitor from any liability, duty or obligation hereunder, except to
the extent Indemnitor has been prejudiced by any delay or failure to provide
such notice. Indemnitor will pay interest on any amount not paid from the time
such Losses are incurred prior to the date of notice at the non-Default Rate
described in the Note and shall pay interest on any such amount not paid within
ten (10) days of notice from Indemnitee to Indemnitor that such amount is due
and payable at the Default Rate, but in no event to exceed the maximum interest
rate allowed by law. The Indemnified Persons shall be entitled to recover the
full amount of all items to be indemnified or reimbursed pursuant to this
Agreement, regardless of whether (i) such items are incurred or suffered
pursuant to an order of any Governmental Agency relating to the cleaning up,
remedying or other responsive action required by applicable law, or (ii) any
Indemnified Person now or hereafter has or should have had actual knowledge of
any environmental condition giving rise to an indemnification or reimbursement
obligations under this Agreement.
4. Obligation to Defend.
(a) Assumption of Defense. Indemnitor is bound to defend any and all
actions or proceedings that may be brought against any Indemnified Person in
connection with or arising out of the matters covered by this Agreement upon
receipt of written notice from any Indemnified Person that a claim of a nature
described in this indemnity has been asserted against such Indemnified Person.
In the event that Indemnitor is defending an Indemnified Person, Indemnitor may
settle the claim only with the Indemnified Person's prior written consent, said
consent or the denial thereof to be in the Indemnified Person's reasonable
discretion.
(b) Delivery of Acknowledgment. Within thirty (30) days from the
date of receipt by Indemnitor from Indemnified Person of a notice of claim
pursuant to the foregoing Paragraph 4(a), Indemnitor must acknowledge in a
writing satisfactory to the Indemnified Person its duty to defend (the
"Acknowledgment"); provided, however, that until the Indemnified Person receives
the Acknowledgment, the Indemnified Person shall be entitled to defend such
claim and Indemnitor shall be bound in the manner set forth in subparagraph 4(d)
hereof.
(c) Conduct of Defense; Participation by Indemnified Person. In the
event that Indemnitor is defending an Indemnified Person, such defense shall be
conducted by reputable attorneys retained by Indemnitor, satisfactory to said
Indemnified Person in its reasonable discretion, at Indemnitor's sole cost and
expense. In addition, said Indemnified Person shall have the right to
participate in such proceedings and to be represented by attorneys of its own
choosing. The Indemnified Person shall be responsible for the costs of such
participation unless the Indemnified
3
47
Person shall have concluded in its reasonable discretion that the interests of
the Indemnified Person and of Indemnitor in the action conflict in such a manner
and to such an extent as to require, consistent with applicable standards of
professional responsibility, retention of separate counsel for the Indemnified
Person, in which case Indemnitor shall pay for separate counsel chosen by the
Indemnified Person.
(d) Indemnitor's Failure to Defend. If Indemnitor fails to deliver
the Acknowledgment or fails to choose counsel satisfactory to the Indemnified
Person, Indemnitor shall not thereafter be entitled to elect to defend, and
Indemnitor shall be bound by and shall be conclusively liable for the results
obtained by the Indemnified Person, including without limitation the amount of
any judgment or good faith out-of-court settlement or compromise and all costs
and fees of counsel incurred by the Indemnified Person in connection therewith.
5. Intentionally Omitted.
6. Notification by Indemnitor. Indemnitor agrees promptly, upon its
receipt of notice thereof, to notify Indemnitee of the commencement of any
litigation or proceedings pending, threatened or commenced (whether or not
served) against Indemnitor or any other party in connection with Hazardous
Substances and the Property and of the receipt of any notice from any
Governmental Agency in regard to Hazardous Substances and the Property.
Indemnitor shall immediately upon receipt provide the Indemnified Person with
true, complete and correct copies of all such notices and other documentation
related to said notices, litigation or proceedings.
7. Invalidity. If any terms of this Agreement shall be held invalid,
illegal or unenforceable, such provisions shall be severable from the rest of
this Agreement and the validity, legality, or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
8. Attorneys' Fees. In any action to enforce or interpret this Agreement,
the prevailing party shall be entitled to receive from the losing party its
attorneys' fees and costs incurred in connection therewith.
9. No Time Limit. There is no time limitation on Indemnitor' obligations
hereunder, and the Indemnitor waives all present and future statutes of
limitations as a defense to any action to enforce the provisions of this
Agreement.
10. Notice. All notices, demands or requests provided for or permitted to
be given pursuant to this Agreement must be in writing and shall be deemed to
have been properly given or served by depositing the same with a nationally
recognized overnight courier service or in the United States Mail, postpaid and
registered or certified return receipt requested, and addressed to the addresses
specified below. All notices, demands and requests shall be effective upon being
deposited with a nationally recognized courier service or, on the date that is
two (2) business days after such deposit, upon being deposited in the United
States Mail. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request sent. By giving at least thirty (30)
days written notice hereof,
4
48
Indemnitor or the Indemnitee shall have the right from time to time and at any
time during the term of this Agreement to change their respective addresses.
"Indemnitee" and "Indemnified Persons"
DORFINCO CORPORATION
c/o Textron Financial Corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Division Counsel
"Indemnitor"
PREFERRED EQUITIES CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President and General Counsel
11. Captions, Gender, and Number. Any section or paragraph, title or
caption contained in this Agreement is for convenience only and shall not be
deemed a part of this Agreement. As used in this Agreement, the masculine,
feminine or neuter gender, and the singular or plural number, shall each be
deemed to include the others whenever the context so allows.
12. Indemnified Persons' Rights. The parties hereto expressly acknowledge
that this Agreement is made expressly only for the benefit of the Indemnified
Persons.
13. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties named herein and their respective
successors and assigns. Indemnitor's obligations hereunder shall survive and
continue to be of full force and effect notwithstanding a foreclosure conducted
pursuant to the Deed of Trust, the making of a deed in lieu of foreclosure by
Indemnitor in favor of Indemnitee or a transfer of any other interest in the
Property, whether by Indemnitor or Indemnitee or by any successor or assignee of
Indemnitor or Indemnitee.
14. Failure or Indulgence Not Waiver. No failure or delay on the part of
an Indemnified Person in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any power, right or privilege preclude any other or further exercise of any such
power, right or privilege. All powers, rights and privileges hereunder are
cumulative to, and not exclusive of, any powers, rights or privileges otherwise
available.
15. Governing Law. This Agreement is to be governed by and construed in
accordance with the laws of the State of Rhode Island without regard to conflict
of laws principles; provided, however, that the laws of the State of Nevada
shall apply with respect to the procedural and substantive requirements of
Nevada real property and personal property law with respect to any
5
49
foreclosure or other action to realize all real and personal property collateral
security for the Loan located within the State of Nevada.
16. Joint and Several Obligation. If more than one person has executed
this Agreement as Indemnitor or becomes obligated under this Agreement as
Indemnitor, the obligations and covenants of each such person shall be joint and
several. The release by Indemnitee of any party liable under this Agreement
shall not operate to release any other party liable hereunder.
17. Effect of this Agreement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against the Indemnitor under the Bankruptcy Code, as the same may be amended,
for liquidation or reorganization, or should Indemnitor become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Indemnitor's assets. This
Agreement shall continue to be effective if at any time payment or performance
of the Indemnitor's obligations (or any part thereof) under the Deed of Trust or
the other Security Documents (as defined in the Deed of Trust) is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by Indemnitee, whether as a "preferential transfer," "voidable
preference," "fraudulent conveyance," or otherwise, as if the portion of such
payment rescinded, reduced, restored, or returned had never been made.
18. Jury Trial; Jurisdiction. Indemnitor hereby waives the right to trial
by jury in any litigation arising out of, relating to, or connected with this
Agreement, it being acknowledged by Indemnitor that Indemnitor is a professional
developer engaged and knowledgeable in sophisticated commercial real estate
transactions and that Indemnitor makes this waiver of trial by jury knowingly
and voluntarily and only after consultation with sophisticated legal counsel of
Indemnitor's choosing. Indemnitor hereby consents to the non-exclusive personal
jurisdiction of the federal and state courts located in Providence County, Rhode
Island in any and all actions between the Indemnitor and the Indemnitee arising
under or in connection with this Agreement, the Loan or any of the Security
Documents.
IN WITNESS WHEREOF, Indemnitor has executed this Agreement as of the date
and year first written above.
"Indemnitor"
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Title: President
---------------------------------
50
"Indemnitee"
DORFINCO CORPORATION,
a Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
7
51
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
All that real property situated in the State of Nevada, County of ▇▇▇, bounded
and described as follows:
Parcel 1:
Lot One (1) Block One (1) of CALVADA VALLEY UNIT NO. 2 as shown by map recorded
October 5, 1970 as File No. 20291 in the Office of the County Recorder of ▇▇▇
County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 2:
Lot One hundred forty-eight (148) in Block Sixteen (16) of CALVADA VALLEY UNIT
NO. 6, as shown by map recorded February 5, 1973 as Document No. 36024 in the
Office of the County Recorder of ▇▇▇ County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 3:
Parcels One (1) and Three (3) of Parcel Map recorded May 24, 1983 as File No.
81177 and amended by Certificate of Amendment recorded June 14, 1983 as File No.
83144 and by Certificate of Amendment recorded December 12, 1983 as File No.
99135 and by Certificate of Amendment recorded March 16, 1992 as File No. 304864
of Official Records, ▇▇▇ County, Nevada.
Parcel 4:
Parcel Two (2) as shown by Parcel Map recorded April 26, 1994 as File No. 351410
of Official Records, ▇▇▇ County, Nevada.
1
52
Parcel 5:
Lot Forty (40) in Block Six (6) of AMENDED PLAT OF CALVADA VALLEY UNIT 6,
recorded December 28, 1993 as Document No. 345007 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
Lots Nineteen (19) and Nineteen A (19A) (to the extent of Preferred Equities
Corporation's reversionary interest in Lot Nineteen A (19A)) of Block Six (6) of
CALVADA VALLEY UNIT NO. 6, recorded February 5, 1973 as File No. 36024 of
Official Records, ▇▇▇ County, Nevada, more particularly described as Parcel
Nineteen (19) as shown on Parcel Map recorded January 6, 1983 as File No. 72610
of Official Records, ▇▇▇ County, Nevada.
Lot One (1) in Block Fifteen (15), Lots One hundred seventy-three (173) and One
hundred seventy-four (174) in Block Eleven (11) and Lot Three hundred
twenty-three (323) in Block Six (6) of CALVADA VALLEY UNIT NO. 6, as shown by
map recorded February 5, 1973 as Document No. 36024 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
2
53
GUARANTY AGREEMENT
This GUARANTY AGREEMENT ("Guaranty") made as of the 12th day of August,
1998, by the undersigned party ("Guarantor") to, with, and for the benefit of
DORFINCO CORPORATION ("Lender"), a Delaware corporation, having its principal
office at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
WITNESSETH:
WHEREAS, PREFERRED EQUITIES CORPORATION, a Nevada corporation
("Borrower") desires to obtain a $4,000,000.00 loan ("Loan") from Lender;
WHEREAS, Lender is unwilling to make the Loan to Borrower unless
Guarantor guarantees to Lender the full and timely payment and satisfaction of
the Obligations (as hereinafter defined) of Borrower; and
WHEREAS, Guarantor acknowledges that the making of the Loan by Lender to
Borrower provides direct benefits to Guarantor;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce Lender to
make the Loan to Borrower, and intending to be legally bound, Guarantor does
hereby warrant, represent and covenant unto Lender as follows:
1. GUARANTY AND SURETY.
Guarantor hereby absolutely and unconditionally guarantees, and becomes
surety for, the full and timely payment and performance of the Obligations.
2. OBLIGATIONS.
2.1 The word "Obligations" as used throughout this Guaranty means
all debts, obligations, and liabilities of Borrower arising out
of or relating to the following documents each of even date
herewith:
2.1.1. Promissory Note ("Note") made by Borrower to the order
of Lender in an original face amount of $4,000,000.00;
2.1.2. Loan and Security Agreement (the "Loan Agreement") by
and between Borrower and Lender;
2.1.3 Environmental Indemnity Agreement given by Borrower to
Lender; and
1
54
2.1.4 The other documents, instruments and agreements
described in the Loan Agreement as loan or security
documents.
(All of the foregoing, including any future modifications thereto, are
hereinafter collectively referred to as the "Loan Documents"). Without limiting
the generality of the foregoing, "Obligations" is used herein in its most
comprehensive sense to include all debts, obligations and indebtedness described
in the Loan Documents, whether now or hereafter made, incurred, or created,
voluntary or involuntary, due to not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and regardless of whether there is any
recourse with respect to any portion of such Obligations as against Borrower.
3. SUBSEQUENT ACTS BY LENDER.
Lender may, at its sole discretion and without notice to
Guarantor, take any action permitted under the Loan Documents which might
otherwise be deemed a legal or equitable release or discharge of Guarantor's
obligations hereunder without either impairing or affecting the liability of
Guarantor for payment of the Obligations, which actions might include, by way of
illustration and not limitation:
3.1 the renewal or extension of any of the Obligations or
any payments hereunder;
3.2 the acceptance of partial payment of the Obligations;
3.3 the settlement, release, compounding, compromise,
cancellation, rearrangement or consolidation of any of
the Obligations;
3.4 the collection of or other liquidation of any claims
Lender may have in respect to the Obligations;
3.5 the granting of indulgences, forebearances, compromises,
extensions or adjustments in respect to any covenant or
agreement under the Loan Documents;
3.6 the release from liability of any Guarantor and/or any
additional parties who may guarantee payment of the
Obligations or any portion thereof;
3.7 the release, surrender, exchange or compromise to or
with Borrower of any lien, security or collateral held
by Lender as security for the Obligations; or
3.8 the release or compromise of any lien or security held
by Lender as security for the liability of any person
who is guarantying the Obligations.
2
55
4. EXPENSES.
Guarantor agrees to reimburse Lender for all reasonable expenses
that are not reimbursed by Borrower (including without limitation reasonable
attorneys' fees and expenses) incurred in good faith by Lender in enforcing the
Obligations, pursuing any remedies set forth in the Loan Documents, and
enforcing this Guaranty. Guarantor shall not have any obligation for payment of
reimbursement of any cost or expense incurred by Lender, Textron Financial
Corporation or any assignee of this Guaranty for salaries or wages of their
respective officers or employees or for any fixed overhead expenses.
5. PAYMENT BY GUARANTOR.
Upon the occurrence and during the continuance of an Event of
Default under the Loan Documents, Guarantor agrees to pay or perform on written
demand all the Obligations. Lender shall not be required to liquidate any lien
or any other form of security, instrument, or note held by Lender prior to
making such demand. THIS IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT OF
COLLECTION, and Guarantor hereby waives all rights that Guarantor may have, if
any, to require that any action be brought against Borrower (or any other
person) or to require that resort be first made against any security prior to
demanding payment or performance hereunder.
6. CUMULATIVE REMEDIES.
Guarantor hereby agrees that all rights and remedies that Lender
is afforded by reason of this Guaranty are separate and cumulative and may be
pursued separately, successively, or concurrently, as Lender deems advisable. In
addition, all such rights and remedies are non-exclusive and shall in no way
limit or prejudice Lender's ability to pursue any other legal or equitable
rights or remedies that may be available. Without limiting the generality of the
foregoing, Guarantor agrees that in any action by Lender by reason of the
Obligations, Lender at its election may proceed (a) against Guarantor together
with Borrower, (b) against Guarantor and Borrower individually, or (c) against
Guarantor only without having commenced any action against or having obtained
any judgment against Borrower.
7. WAIVERS BY GUARANTOR.
7.1 Guarantor hereby waives:
7.1.1. notice of acceptance of this Guaranty and of
creation of the Obligations;
7.1.2. presentment and notice of non-payment;
7.1.3. protest, notice of protest, and notice of
dishonor to Guarantor or to
3
56
any other party with respect to any of the
Obligations;
7.1.4. all other notices to which Guarantor might
otherwise be entitled;
7.1.5. any defense or circumstance (including, without
limitation, disability, insolvency, lack of
authority or power, insanity, minority, death or
dissolution) which might otherwise constitute a
legal or equitable discharge of Guarantor's
liability hereunder other than a defense based
on the gross negligence or wilful misconduct of
Lender;
7.1.6. any defense of Borrower to the Obligations other
than a defense based on the gross negligence or
wilful misconduct of Lender or satisfaction of
the Obligations;
7.1.7. any rights to extension, composition or
otherwise under the Bankruptcy Code or any
amendments thereof, or under any state or other
federal statute;
7.1.8. the right to trial by jury in any litigation
arising out of, relating to, or connected with
this Guaranty, if being acknowledged by
Guarantor that Guarantor is knowledgeable in
sophisticated commercial real estate
transactions, and that Guarantor makes this
waiver of trial by jury knowingly and
voluntarily and only after consultation with
sophisticated legal counsel of Guarantor's
choosing; and
7.1.9. the benefits of Nevada's "one-action rule" under
Nev. Rev. Stat. Section 40.430.
/s/ [SIG]
--------------------
Guarantor's Initials
7.2 It is expressly agreed that Guarantor shall remain
liable hereon regardless of whether Borrower is held to
be not liable on the Obligations (other than in the case
of satisfaction thereof) and regardless of whether all
or any portion of the Obligations are "non-recourse" or
"limited recourse". It is agreed between Guarantor and
Lender that the foregoing waivers are of the essence of
the Loan transaction and that, but for this Guaranty and
such waivers, Lender would decline to make the Loan.
8. WAIVER AND RELEASE OF SUBROGATION AND PARTICIPATION.
Except as otherwise provided in NRS 40.475 and 40.485, Guarantor
shall have no right of subrogation in or under the Loan Documents, and no rights
of reimbursement, indemnity or
4
57
contribution from the Borrower or any other rights by law, equity, statute or
contract that would give rise to a creditor-debtor relationship between
Guarantor and the Borrower. Except as otherwise provided in NRS 40.475 and
40.485, Guarantor shall have no right to participate in any way in any of the
collateral which is conveyed under the Loan Documents as security for the
Obligations. Guarantor hereby explicitly waives and releases any of the
above-described rights of subrogation, reimbursement, indemnity, contribution,
participation, and any right to require the marshaling of Borrower's assets
under any circumstances to the extent Guarantor is legally permitted to do so.
/s/ [SIG]
--------------------
Guarantor's Initials
9. INDEMNIFICATION.
Guarantor expressly agrees that if either Borrower or the
Guarantor makes any payment under any Loan Documents (as defined in the Loan
Agreement) to Lender, which payment or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, or otherwise required to
be repaid to a trustee, receiver or any other party under any bankruptcy act,
state or federal law, common law or equitable cause, then to the extent of such
repayment, the indebtedness or any part thereof intended to be satisfied, the
liens securing the same and this Guaranty shall be revived and continued in full
force and effect as if said payment had not been made.
10. REPRESENTATIONS AND WARRANTIES.
Guarantor hereby represents and warrants to Lender that:
10.1 Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the
State of New York, and has all requisite power,
corporate or otherwise, to conduct its business and to
execute and deliver, and to perform its obligations
under, this Guaranty.
10.2 The execution, delivery and performance by Guarantor of
this Guarantor has been duly authorized by all necessary
corporate action by Guarantor and does not and will not
(i) violate any provisions of the certificate or
articles of incorporation, bylaws, or any agreement,
law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in
effect to which Guarantor is a party or is subject; (ii)
result in, or require the creation or imposition of, any
lien upon or with respect to any asset of Guarantor; or
(iii) result in a breach of, or constitute a default by
Guarantor under, any indenture, loan or credit agreement
or any other agreement, document, instrument or
certificate to which Guarantor is a party or by which it
or any of its assets are bound or affected.
10.3 No approval, authorization, order, license, permit,
franchise or consent of, or
5
58
registration, declaration, qualification or filing with,
any governmental authority is required in connection
with the execution, delivery and performance by
Guarantor of this Guaranty.
10.4 Guarantor's last annual financial statements were
prepared in accordance with generally accepted
accounting principles ("GAAP") and fairly present the
financial condition and results of operation of
Guarantor as of the date or dates thereof and for the
periods covered thereby. There were no material
liabilities, direct or indirect, fixed or contingent, of
Guarantor as of the dates of such financial statements
which were not reflected therein or in the notes
thereto, which have not otherwise been disclosed to
Lender in writing. Except for any such changes
heretofore expressly disclosed in writing to Lender,
there has been no material adverse change in the
financial condition of Guarantor from the financial
conditions shown in the foregoing financial statements,
nor has Guarantor incurred any material liabilities,
direct or indirect, fixed or contingent, which are not
shown in its financial statements. Guarantor is able to
pay all of its debts as they become due. Guarantor shall
maintain such solvent financial condition, giving effect
to this Guaranty, as long as Guarantor is obligated to
Lender hereunder. Guarantor's obligations under this
Guaranty will not render Guarantor unable to pay its
total liabilities.
10.5 Except as otherwise disclosed in the financial
statements referred to in Section 10.4 above or in
Exhibit "E" to the Loan Agreement, there are no actions,
suits, proceedings, orders or injunctions pending or
threatened against or affecting Borrower, at law or in
equity, or before or by any governmental authority,
which could have a material adverse effect on Guarantor.
10.6 No information, exhibit or written report furnished by
or on behalf of Borrower to Lender in connection with
the Loan contains any material misstatement of fact or
omits the statement of a material fact necessary to make
any statements contained herein or therein not
misleading.
10.7 Guarantor now has no defense whatever to any action,
suit or proceeding whatsoever that may be instituted on
this Guaranty.
10.8 No other agreement exists between Guarantor and Lender
regarding the liability of Guarantor hereunder.
10.9 This Guaranty constitutes a valid obligation of
Guarantor.
6
59
11. STRICT PERFORMANCE; WAIVERS.
No failure, delay or omission by Lender to exercise any of the
rights, powers, remedies and privileges hereunder shall be deemed a waiver
thereof and every such right, power, remedy and privilege may be exercised
repeatedly. No notice to or demand on Guarantor shall be deemed to be a waiver
of the right of Lender to take further action without notice or demand as
provided herein. In no event shall any modification or waiver of the provisions
of this Guaranty be effective unless in writing executed by Lender. Any waiver
granted shall be applicable only in the specific instance for which it is given.
Failure of Lender to insist upon strict performance or observance of any of the
terms, provisions and covenants hereof or to exercise any right herein contained
shall not be construed as a waiver or relinquishment of the right to demand
strict performance on the Obligations and shall not be deemed a waiver of the
breach of any provision hereof or of any of the Loan Documents.
12. CAPTIONS.
The captions appearing herein are used for reference only and
shall not be construed as limiting anything set forth herein.
13. SEVERABILITY.
The invalidity or unenforceability of any provision of this
Guaranty shall not affect the other provisions hereof, and this Guaranty shall
be construed as if the invalid or unenforceable provision had never been a part
of this Guaranty.
14. GOVERNING LAW.
All questions with respect to the construction of this Guaranty
and the rights and liabilities of the parties hereto shall be determined in
accordance with the applicable provisions of the internal laws of the State of
Nevada without regard to the principles of conflicts of laws.
15. ASSIGNMENT; DELEGATION; BINDING EFFECT.
After funding of the Loan by Lender, this Guaranty is assignable
and transferable by Lender. Each reference herein to Lender shall be deemed to
include its successors and assigns, in whose favor the rights and privileges of
this Guaranty shall also run. The duties and obligations of Guarantor may not be
transferred by Guarantor without the prior written consent of Lender. The duties
and obligations of Guarantor shall bind Guarantor's heirs, personal
representatives, executors, successors and assigns.
16. TERMINATION; REINSTATEMENT.
16.1 Guarantor's obligations hereunder shall terminate, and
this Guaranty shall be
7
60
released, upon payment and performance in full of the
Obligations; provided, however and except that, if there
exists with respect to the Related Indebtedness (as
defined in the Loan Agreement at the time of repayment
and performance in full of the Obligations a default or
event of default, or any event or circumstance which
with the passage of time or giving of notice would
become a default or event of default under the Related
Loan Documents (as defined in the Loan Agreement), then
the release and termination of this Guaranty shall not
be granted by Lender for so long as any such default or
event of default or such other event or circumstance is
continuing.
16.2 This Guaranty shall remain in full force and effect and
continue to be effective should any petition be filed by
or against Borrower under the Bankruptcy Code, as at any
time amended, for liquidation or reorganization, or
should Borrower become insolvent or make an assignment
for the benefit of creditors or a receiver or trustee be
appointed for all or any significant part of Borrower's
assets, and this Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time
payment of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by
Lender, whether as a "preferential transfer," "voidable
preference," "fraudulent conveyance," or otherwise, as
if the portion of such payment rescinded, reduced,
restored or returned had never been made.
17. NOTICES.
All notices, demands or requests provided for or permitted to be
given pursuant to this Agreement must be in writing and shall be deemed to have
been properly given or served by depositing the same with a nationally
recognized overnight courier service or in the United States Mail, postpaid and
registered or certified return receipt requested, and addressed to the addresses
specified below. All notices, demands and requests shall be effective upon being
deposited with a nationally recognized courier service or, on the date that is
two (2) business days after such deposit, upon being deposited in the United
States Mail. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request sent. By giving at least thirty (30)
days written notice hereof, Guarantor and Lender shall have the right from time
to time and at any time during the term of this Agreement to change their
respective addresses.
8
61
The addresses are:
Lender: Dorfinco Corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Division Counsel
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Guarantor: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President and General Counsel
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
w/copy to: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
18. JURISDICTION.
Guarantor hereby consents to the non-exclusive personal
jurisdiction of the federal and state courts located in ▇▇▇▇▇ County, Nevada in
any and all actions between the Guarantor and Lender arising under or in
connection with this Guaranty, the Loan or any of the Loan Documents.
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty the
day and year first above written.
MEGO FINANCIAL CORP.,
a New York corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Its: Vice President
------------------------------
9
62
SUBORDINATION AGREEMENT
TO: DORFINCO CORPORATION
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned Mego Financial Corp., a New York corporation
("Creditor") is or may be a creditor of Preferred Equities Corporation, a Nevada
corporation ("Debtor"). Creditor understands that Debtor has requested you to
extend credit to Debtor, but that you are unwilling to do so unless you first
receive Creditor's subordination agreement as herein contained.
In order to induce you at any time or from time to time at your option,
to make loans or extend credit or other accommodation or benefit to or for the
account of Debtor, under the Loan Agreement (as hereinafter defined), or to
grant such renewals or extensions as you may deem advisable, it is agreed as
follows:
1. Creditor and Debtor represent and warrant to you that,
(a) At May 31, 1998, the total PEC Indebtedness owing by Debtor
to Creditor is $961,000.00. "PEC Indebtedness" as used herein shall mean present
indebtedness and any future indebtedness of Debtor to Creditor which may be from
time to time directly or indirectly incurred, including any negotiable
instruments evidencing same, all debts, demands, monies, indebtedness,
liabilities and obligations owed or to become owing including interest,
principal, costs and other charges, and all claims, rights, causes of action,
judgments, decrees or other obligations of any kind whatsoever; provided,
however, that the term "PEC Indebtedness" does not include any sums
1
63
payable by Debtor to Creditor from time to time under income tax sharing
arrangements between Debtor and Creditor.
(b) there is no default in the PEC Indebtedness from Debtor to
Creditor.
2. Creditor agrees with you that the PEC Indebtedness and all security
therefor shall be and hereby is subordinated to the obligations of Debtor to you
with respect to the Loan (as defined in the Loan Agreement) and all other
obligations of Debtor to you under any and all of the Loan Documents (as defined
in the Loan Agreement) (collectively, the "Obligations") to the extent (and only
to the extent) hereinafter provided. After the occurrence and during the
continuance of an Event of Default under, and as defined in, that certain Loan
and Security Agreement (the "Loan Agreement"), of even date herewith between
you, as lender, and Debtor, as borrower:
(a) the payment of the PEC Indebtedness shall be deferred until
the full payment of the Obligations (including all interest accruing after the
date of filing of a petition by or against Debtor under any bankruptcy act or
code) of any nature whatsoever now due to you from Debtor or which may hereafter
be incurred and become due to you from Debtor.
(b) Creditor will not, without your prior written consent,
assert, collect, enforce or release the PEC Indebtedness or any part thereof or
take any action to foreclose, realize upon or release any collateral securing
the PEC Indebtedness or enforce any security agreements, real estate mortgages,
lien instruments, or other encumbrances securing the PEC Indebtedness.
(c) Creditor will hold in trust and immediately pay to you in the
same form of payment received from application upon the amount now or hereafter
owing to you by Debtor, any amount Debtor pays to Creditor on the PEC
Indebtedness.
2
64
(d) Creditor will forthwith assign, deliver or cause to be
delivered to you any collateral for the PEC Indebtedness now held by Creditor or
anyone on its behalf, or in the future received by it or anyone on its behalf.
(e) Creditor, in its capacity hereunder as Creditor, agrees that
it will not, without your prior written consent, commence, prosecute or
participate in any administrative, legal, or equitable action against Debtor for
collection of the PEC Indebtedness or in any administrative, legal, or equitable
action for collection of the PEC Indebtedness that might adversely affect Debtor
or its properties.
3. If Creditor in violation of this Agreement shall commence, prosecute
or participate in any suit, action or proceeding against Debtor, Debtor may
interpose as a defense or plea the making of this Agreement and you may
intervene and interpose such defense or plea in your name or in the name of
Debtor. If after the occurrence and during the continuance of an Event of
Default, Creditor shall attempt to enforce any security agreements, real estate
mortgages or deeds of trust or any lien instruments or other encumbrances
securing payment of any PEC Indebtedness, you or Debtor may by virtue of this
Agreement restrain the enforcement thereof in your name or in the name of
Debtor. If after the occurrence and during the continuance of an Event of
Default, Creditor obtains any assets of Debtor for application to any PEC
Indebtedness as a result of any administrative, legal, or equitable action, or
otherwise, Creditor agrees to forthwith pay, deliver, and assign to you any such
assets for application upon the Obligations.
4. As additional security for the Obligations due you and in furtherance
hereof, upon the occurrence of and during the continuance of an Event of
Default, Creditor:
3
65
(a) shall assign to you the PEC Indebtedness as security for any
and all of the Obligations now and hereafter owing by Debtor to you; and
(b) irrevocably authorizes you or any person you may designate
to, after the security for the Obligations has been exhausted, collect and
receive the proceeds of the PEC Indebtedness and to do any and all things with
the same power and authority that Creditor might or could have done if this
Agreement had not been executed, including the filing and proving of claims in
your name or in the name of Creditor, in receiverships, bankruptcies, and
proceedings under any bankruptcy act or any amendments thereto. The net amount
received by you from the PEC Indebtedness shall be applied to the payment of the
Obligations due and to become due from Debtor to you, and the excess, if any,
shall be returned to Creditor.
5. Upon the occurrence of and during the continuance of an Event of
Default, Debtor agrees with you that it will not, without your prior written
consent, pay to Creditor any sum on account of the PEC Indebtedness, or execute
or delivery any negotiable instruments as evidence of the PEC Indebtedness or
any part thereof.
6. Creditor agrees that you may grant extensions of the time of payment
or performance to and make compromises, including releases of collateral, and
settlements with Debtor and all other persons without the consent of Creditor
and without affecting the agreements of Creditor or Debtor hereunder.
7. If, at any time hereafter, you shall, pursuant to the Loan Agreement
determine to discontinue the extension of credit to Debtor, you may do so. This
Agreement shall continue in full force and effect until Debtor shall have
satisfied all of the Obligations and you shall have been paid
4
66
in full all Obligations that may be due to you from Debtor under the Loan
Agreement and the other Loan Documents. Upon the full payment and satisfaction
by Debtor of all of the Obligations under the Loan Agreement and the other Loan
Documents, this Agreement shall automatically terminate and be of no further
force and effect.
8. This Agreement shall be binding upon the successors and assigns of
Creditor and Debtor, and shall inure to the benefit of your successors and
assigns.
9. This Agreement and the Obligations which it secures and all rights
and liabilities of the parties shall be governed as to validity, interpretation,
enforcement and effect by the laws of the State of Nevada.
10. Unless an Event of Default shall have occurred and be continuing,
nothing in this Agreement is intended or shall be construed to prohibit,
restrict or otherwise limit any payment to or remedy by Creditor at any time so
long as Debtor's cash flow and working capital are sufficient. In addition,
nothing in this Agreement is intended or shall be construed to interfere with
Debtor's payment or Creditor's collection at any time of amounts due by Debtor
under the tax sharing arrangements between Debtor and Creditor; provided,
however, (i) that Creditor shall promptly advise Lender of any change in such
tax sharing arrangements and (ii) that Debtor's cash flow and working capital
shall remain sufficient following any change in such tax sharing arrangement.
11. In the event Creditor received any cash or other property in payment
of PEC Indebtedness which is not permitted under the provisions of Paragraph 10
or other provisions of this Agreement, you shall have the right to recover such
payment from Creditor and apply the same to the Obligations. In the event
Creditor receives any cash or other property in payment of PEC Indebtedness
which is permitted under the provisions of this Agreement, including, without
5
67
limitation, Paragraph 10 hereof, Creditor shall not be required to make any
payment to or reimbursement of yourself or Debtor as a result of such payment.
IN WITNESS WHEREOF, Creditor and Debtor have severally duly executed
this Agreement as of the 12th day of August, 1998.
DEBTOR:
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Its: President
-----------------------------------
CREDITOR:
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Its: Vice President
-----------------------------------
ACCEPTED BY:
DORFINCO CORPORATION
By:
------------------------------
Its:
----------------------------
6
68
BORROWER'S CERTIFICATE
Re: $4,000,000 loan by Dorfinco Corporation, a Delaware corporation, to
Preferred Equities Corporation, a Nevada corporation. Borrower's address: ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇. Real property security located in ▇▇▇
County, Nevada (the "Real Property").
* * * * * *
In order to induce DORFINCO CORPORATION ("Lender") to make the
above-referenced loan (the "Loan") to Preferred Equities Corporation, a Nevada
corporation ("Borrower"), Borrower hereby certifies and represents as of the
date of the funding of the Loan, and warrants as follows:
(a) Except as set forth on Exhibit "E" to the Loan and Security
Agreement dated August 12, 1998 (the "Loan Agreement"), between Borrower and
Lender, there are no actions, suits or proceedings pending, and, to the best
knowledge and belief of Borrower, there are no actions, suits, claims,
investigations or proceedings threatened, against or affecting Borrower, or the
business, operations, properties or assets of Borrower, before or by any
governmental department, commission, board, regulatory authority, bureau, agency
or instrumentality, domestic, foreign, Federal, state or municipal (herein
collectively called "governmental agency"), or any court, arbitrator or grand
jury, which may result in any material adverse change in the business
operations, properties or assets or in the condition, financial or otherwise, of
Borrower, or in the ability of Borrower to perform its obligations under the
documents to be executed in connection with the Loan (the "Loan Documents").
Borrower is not in default with respect to any judgment, order, writ,
injunction, decree, demand, rule or regulation of any court, arbitrator, grand
jury or of any governmental agency, default under which might have consequences
which would materially and adversely affect the business, operations, properties
or assets or the condition, financial or otherwise, of Borrower.
(b) Neither the execution and delivery by Borrower of the Loan
Documents, nor the consummation of the transaction contemplated therein, nor
compliance with the terms and conditions thereof will conflict with or result in
a breach of, or constitute a breach under any of the terms, obligations,
covenants, conditions or provisions of Borrower's articles of incorporation or
bylaws or of any indenture, mortgage, lease, deed of trust, pledge, bank loan or
credit agreement, or any other agreement or instrument to which Borrower is now
a party or by which its properties may be bound or affected, or any judgment,
order, writ, injunction, decree or demand of any court, arbitrator, grand jury
or governmental agency, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any property or asset of
Borrower under the terms or provisions of any of the foregoing. Borrower is not
in default in the performance or observance of any of the terms, obligations,
covenants, conditions or provisions contained in any indenture or other
agreement creating, evidencing or securing an indebtedness of Borrower or
pursuant to which Borrower is a party or by which Borrower or its properties may
be bound or affected.
1
69
(c) To the best of Borrower's knowledge after diligent inquiry,
Borrower has obtained all required consents and releases in order to enter into
the loan transaction and execute the Loan Documents and has complied with and is
not in violation of all applicable statutes, laws, ordinances and regulations of
any kind or nature in order to effectively vest in Lender a valid first lien in
the Real Property pursuant to the Loan Documents.
(d) Borrower has the power and authority to enter into the Loan
and execute the Loan Documents and the parties executing the Loan Documents on
behalf of Borrower have been authorized to do so. The Loan is a valid obligation
of Borrower.
(e) To Borrower's best knowledge after diligent inquiry, except
as may be set forth in Exhibit "E" to the Loan Agreement, Borrower has complied
in all material respects with all applicable statutes, rules, regulations,
orders, restrictions, licenses and permits of any domestic or foreign government
or any instrumentality or agency thereof, having jurisdiction over the conduct
of its business and ownership of its properties (including, without limitation,
applicable statutes, rules, regulations, orders and restrictions relating to
equal employment opportunities, zoning, building, fire, health and safety and
environmental standards or controls) and Borrower has no knowledge of any event
or condition that would cause any of the above to be violated in any material
respect.
(f) Borrower has filed all United States income tax returns and
all state and municipal tax returns which are required to be filed, and has
paid, or made provision for the payment of, all taxes which have become due
pursuant to said returns or pursuant to any assessment received by Borrower,
except such filings and taxes, if any, as are being contested in good faith and
as to which adequate reserves have been provided.
(g) Subject to the Permitted Encumbrances described on Exhibit
"B" to the Deed of Trust (as defined in the Loan Agreement), Borrower has good
and marketable title in fee simple absolute to all of the Real Property (except
Parcel 19A thereof) free and clear of any interest which could divest Borrower's
interest therein, divest Lender's interest therein or which could adversely
affect the validity and/or priority of the lien of the Deed of Trust given as
security for the Loan.
(h) Borrower is not a foreign corporation, foreign partnership,
foreign trust, foreign estate or foreign person (as those terms are defined in
the Internal Revenue Code of 1986, as amended) and Borrower's U.S. Federal Tax
I.D. Number is ▇▇-▇▇▇▇▇▇▇. Borrower's address is as set forth on page 1 hereof.
Borrower is a Nevada corporation duly formed and validly existing under the laws
of the State of Nevada.
(i) To the best of Borrower's knowledge after diligent inquiry,
the Real Property and soil and ground water thereof are free from any toxic
and/or hazardous materials including asbestos, PCBs, pesticides, herbicides and
any other material(s) defined as "hazardous substances," "hazardous materials,"
or "toxic substances" in the Comprehensive Environmental Response, Compensation
and Liability act of 1980 as Amended, the Hazardous Materials Transportation
Act, The Resource Conservation and Recovery Act, and those substances defined as
hazardous or toxic wastes under
2
70
applicable state law (other than any landscaping or maintenance products of a
type or quantity typically used at a location having a use consistent with
Borrower's use of the Real Property as of the Loan closing). Further, the
Borrower agrees that it will not permit the storage of any toxic and/or
hazardous material, as described above, in, on and/or around the Real Property
now or at any future time. Borrower will indemnify and save Lender harmless from
any and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including, without limitation, diminution in value of the Real Property)
which may result from contamination of the Real Property by hazardous and/or
toxic material(s), except to the extent that any such claim, judgment, damage,
penalty, fine, cost, liability or loss arises from the gross negligence or
wilful misconduct of Lender.
(j) All work, labor, services and materials, if any, furnished to
or in connection with the Real Property have been fully paid for, with the
exception of any work currently in progress as to which Borrower has properly
posted a Notice of Nonresponsibility and as to which no mechanic's,
materialman's or other liens have been previously filed, so that no mechanic's,
materialman's or other lien may properly be filed against the Real Property or
any portion thereof for work done up to the funding of the Loan, except as to
unpaid items which the title policy will insure over.
(k) Neither Borrower nor Guarantor is the subject of any
insolvency or bankruptcy proceeding or the subject of any suit or proceeding at
law or in equity or otherwise, the result of any of which might affect the title
to the Real Property or the improvements thereon or Borrower's ability to
perform its obligations and agreements under the Loan Documents or under
Borrower's articles of incorporation or bylaws.
(l) Borrower has no actual knowledge of any violations in
connection with the use and operation of the Real Property, whether filed or
threatened, or of any restriction against the sale of the Real Property or any
portion thereof; all required permits and licenses have been obtained for the
Real Property.
(m) At the time of disbursement of the funds in connection with
the Loan:
(i) The Real Property has not been taken, in whole or in
part, in condemnation or any other similar proceedings, and
no such proceedings were pending; and
(ii) The representations made in the materials submitted in
connection with the application for the Loan by Borrower,
including but not limited to the type of development, income
and expenses of the Real Property and the financial condition
and credit of Borrower are as represented in said materials
without material adverse change, except such change as has
been approved in writing by Lender.
3
71
DATED as of August 12, 1998.
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: President
--------------------------------
4
72
GUARANTOR'S CERTIFICATE
Re: $4,000,000 loan by Dorfinco Corporation, a Delaware corporation, to
Preferred Equities Corporation, a Nevada corporation, to be guaranteed by Mego
Financial Corp., a New York corporation. Guarantor's address: ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
* * * * * *
In order to induce DORFINCO CORPORATION ("Lender") to make the
above-referenced loan (the "Loan") to Preferred Equities Corporation, a Nevada
corporation ("Borrower") and to accept the Guaranty Agreement of Mego Financial
Corp. ("Guarantor") in connection therewith, Guarantor hereby certifies and
represents as of the date of the funding of the Loan, and warrants as follows:
(a) Except as set forth on Exhibit "E" to the Loan and Security
Agreement dated August 12, 1998 (the "Loan Agreement"), between Borrower and
Lender, there are no actions, suits or proceedings pending, and, to the best
knowledge and belief of Guarantor, there are no actions, suits, claims,
investigations or proceedings threatened, against or affecting Guarantor, or the
business, operations, properties or assets of Guarantor, before or by any
governmental department, commission, board, regulatory authority, bureau, agency
or instrumentality, domestic, foreign, Federal, state or municipal (herein
collectively called "governmental agency"), or any court, arbitrator or grand
jury, which may result in any material adverse change in the business
operations, properties or assets or in the condition, financial or otherwise, of
Guarantor, or in the ability of Guarantor to perform its obligations under the
Guaranty Agreement (the "Guaranty") to be executed by Guarantor in connection
with the Loan. Guarantor is not in default with respect to any judgment, order,
writ, injunction, decree, demand, rule or regulation of any court, arbitrator,
grand jury or of any governmental agency, default under which might have
consequences which would materially and adversely affect the business,
operations, properties or assets or the condition, financial or otherwise, of
Guarantor.
(b) Neither the execution and delivery by Guarantor of the Guaranty,
nor the consummation of the transaction contemplated therein, nor compliance
with the terms and conditions thereof will conflict with or result in a breach
of, or constitute a breach under any of the terms, obligations, covenants,
conditions or provisions of Guarantor's articles of incorporation or bylaws or
of any indenture, mortgage, lease, deed of trust, pledge, bank loan or credit
agreement, or any other agreement or instrument to which Guarantor is now a
party or by which its properties may be bound or affected, or any judgment,
order, writ, injunction, decree or demand of any court, arbitrator, grand jury
or governmental agency, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any property or asset of
Guarantor under the terms or provisions of any of the foregoing. Guarantor is
not in default in the performance or observance of any of the terms,
obligations, covenants, conditions or provisions contained in any indenture or
other
1
73
agreement creating, evidencing or securing an indebtedness of Guarantor or
pursuant to which Guarantor is a party or by which Guarantor or its properties
may be bound or affected.
(c) To the best of Guarantor's knowledge after diligent inquiry,
Guarantor has obtained all required consents and releases in order to execute
the Guaranty.
(d) Guarantor has the power and authority to enter into and execute
the Guaranty, and the parties executing the Guaranty on behalf of Guarantor have
been authorized to do so. The Guaranty is a valid obligation of Guarantor.
(e) To Guarantor's best knowledge after diligent inquiry, except as
may be set forth in Exhibit "E" to the Loan Agreement, Guarantor has complied in
all material respects with all applicable statutes, rules, regulations, orders,
restrictions, licenses and permits of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business and ownership of its properties (including, without limitation,
applicable statutes, rules, regulations, orders and restrictions relating to
equal employment opportunities, zoning, building, fire, health and safety and
environmental standards or controls) and Guarantor has no knowledge of any event
or condition that would cause any of the above to be violated in any material
respect.
(f) Guarantor has filed all United States income tax returns and all
state and municipal tax returns which are required to be filed, and has paid, or
made provision for the payment of, all taxes which have become due pursuant to
said returns or pursuant to any assessment received by Guarantor, except such
filings and taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided.
(g) Guarantor is not a foreign corporation, foreign partnership,
foreign trust, foreign estate or foreign person (as those terms are defined in
the Internal Revenue Code of 1986, as amended) and Guarantor's U.S. Federal Tax
I.D. Number is ▇▇-▇▇▇▇▇▇▇. Guarantor's address is as set forth on page 1 hereof.
Guarantor is a New York corporation duly formed and validly existing under the
laws of the State of New York and in good standing and qualified as a foreign
corporation in all jurisdictions in which such good standing and/or
qualification is required.
(h) Guarantor is not the subject of any insolvency or bankruptcy
proceeding or the subject of any suit or proceeding at law or in equity or
otherwise, the result of any of which might affect Guarantor's ability to
perform its obligations and agreements under the Guaranty or under Guarantor's
articles of incorporation or bylaws.
(i) The representations made in the materials submitted by Guarantor
in connection with the application for the Loan by Borrower, including but not
limited to the financial condition and credit of Guarantor are as represented in
said materials without material adverse change, except such change as has been
approved in writing by Lender.
2
74
DATED as of August 12, 1998.
MEGO FINANCIAL CORP.,
a New York corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
--------------------------------
3
75
DEED OF TRUST,
SECURITY AGREEMENT AND FIXTURE FILING
Dated as of August 12, 1998
in the amount of: $4,000,000.00
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
having its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(the "Grantor");
UNITED TITLE OF NEVADA,
a Nevada corporation
having its principal office at ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(the "Trustee"); and
DORFINCO CORPORATION,
a Delaware corporation
having an office at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
(the "Beneficiary").
LOCATION OF PREMISES
▇▇▇ County
State of Nevada
-------------------------------------------
After recording, please return to:
DORFINCO CORPORATION
c/o Textron Financial Corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-▇▇▇▇,
Division Counsel
76
STATE OF NEVADA )
) ss.
COUNTY OF ▇▇▇ )
DEED OF TRUST AND SECURITY AGREEMENT AND FIXTURE FILING
KNOW ALL MEN BY THESE PRESENTS:
THIS DEED OF TRUST (hereinafter referred to as this "Deed") is made and
entered into as of the 12th day of August, 1998, by and among PREFERRED EQUITIES
CORPORATION, a Nevada corporation, having as a mailing address ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as Grantor"), UNITED
TITLE OF NEVADA, a Nevada corporation, having as a mailing address ▇▇▇▇-▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as the
"Trustee") and DORFINCO CORPORATION, a Delaware corporation, having a mailing
address of ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter
referred to as the "Beneficiary").
In order to secure the payment, performance and observance of the
indebtedness and other obligations of Grantor hereinafter set forth, Grantor has
granted and conveyed, and does by these presents mortgage, grant, warrant,
assign, convey, pledge and set over unto the Trustee, IN TRUST, WITH POWER OF
SALE, all of the following described land and interests in land, estates,
easements, rights, improvements, property, fixtures, equipment, furniture,
furnishings, appliances and appurtenances (hereinafter collectively referred to
as the "Premises"):
(a) All those certain tracts, or parcels of land more particularly
described in Exhibit "A" attached hereto and by this reference made
a part hereof (hereinafter referred to as the "Land").
(b) All buildings, structures and improvements (the "Improvements") of
every nature whatsoever now or hereafter situated on the Land.
(c) All construction materials, vaults, gas, electric and other utility
fixtures, radiators, heaters, engines, machinery, boilers, ranges,
elevators, plumbing and heating fixtures, draperies, carpeting and
other floor coverings, fire extinguishers and any other safety
equipment, washers, dryers, water heaters, water fountains, mirrors,
mantels, air conditioning apparatus, refrigerating plants,
refrigerators, cooking apparatus and appurtenances, window screens,
awnings and storm sashes, which are or shall be attached to said
buildings, structures or improvements and all other furnishings,
furniture, goods which are or are to become fixtures, machinery,
equipment, inventory, supplies, appliances, and tangible personal
property of every kind and nature whatsoever
1
77
now or hereafter owned by Grantor and located in, on or about, or
used or intended to be used with or in connection with the use,
operation or enjoyment of the Land and Improvements, and all
attachments, additions, improvements, after-acquired property,
renewals, proceeds and replacements of any of the foregoing and all
the right, title and interest of Grantor in any of the foregoing
property which is subject to or covered by any conditional sales
contract, chattel mortgage or similar lien or claim, together with
the benefit of any deposits or payments now or hereafter made by
Grantor or on behalf of Grantor with respect thereto, all of which
are hereby declared and shall be deemed to be fixtures and
accessions to the freehold and a part of the Premises as between the
parties hereto and all persons claiming by, through or under them,
and which shall be deemed to be a portion of the security for the
indebtedness herein described and to be secured by this Deed.
(d) All now owned or hereafter acquired easements, rights-of-way,
strips, gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water rights and powers, and all
estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances whatsoever, in any way
belonging, relating or appertaining to the Premises or any part
thereof, or which hereafter shall in any way belong, relate or be
appurtenant thereto, and the reversions, remainders, rents, issues,
profits, revenues, accounts, contract rights and general intangibles
of or arising from the Premises (including without limitation all
payments under room occupancy agreements, all leases or tenancies,
proceeds of insurance, prepaid insurance premiums, condemnation
payments, tenant security deposits, escrow funds and payments from
motel guests), and all the estate, right, title, interest, property,
possession, claim and demand whatsoever at law, as well as in
equity, of Grantor of, in and to the same.
(e) Any and all leases, subleases, rental agreements, occupancy
agreements, licenses, concessions, entry fees, other agreements
which grant a possessory interest in all or any part of the Land and
Improvements, together with all rents, issues, profits, revenues,
proceeds, awards, accounts, security deposits and other benefits now
or hereafter arising from the use and enjoyment of the Land and
Improvements or any part thereof.
TO HAVE AND TO HOLD the Premises, with all privileges and appurtenances
thereunto belonging, unto the Trustee, forever. Grantor covenants that Grantor
is lawfully seized and possessed of the Premises as aforesaid, and has all
requisite right and authority to convey the same, that the same is unencumbered
except for those matters expressly set forth in Exhibit "B" attached hereto and
by this reference made a part hereof, and that Grantor does warrant and will
forever defend the title thereto to the Trustee and the Beneficiary against the
claims of all persons whomsoever, except as to those matters set forth in said
Exhibit "B" or otherwise permitted in the Security Documents (as hereinafter
defined).
This Deed is given to secure the following described indebtedness
(collectively the "Indebtedness"):
2
78
(a) All sums evidenced by that certain Promissory Note (hereinafter
referred to as the "Note" dated of even date herewith, made by
Grantor, payable to the order of the Beneficiary in the principal
face amount of up to FOUR MILLION AND NO/100 U.S. DOLLARS
($4,000,000.00), together with interest thereon, with the final
payment being due on August 31, 1999, unless extended as provided in
the Note; together with any and all modifications, renewals and/or
extensions of the Note.
(b) Any and all additional advances made by the Beneficiary to protect
or preserve the Premises or the lien hereof on the Premises, or for
taxes, assessments or insurance premiums as hereinafter provided
(whether or not the original Grantor remains the owner of the
Premises at the time of such advances).
(c) Any and all other sums owed by Grantor to the Beneficiary hereunder,
under the Note, or any and all other indebtedness, liabilities, or
obligations of Grantor to the Beneficiary, of any nature whatsoever,
whether now existing or hereafter created, whether direct, indirect
or secondary, and any and all modifications, extensions or renewals
thereof, including without limitation sums owed under any other
instrument evidencing, securing or in any way concerning the debt
evidenced by the Note. Without limiting the foregoing, this Deed
shall also secure the following indebtedness:
(i) A loan made by Beneficiary to Grantor in the amount of up to
$7,500,000, evidenced by a promissory note in such amount
dated August 9, 1991, and secured by, among other things, a
Loan and Security Agreement dated as of July 31, 1991, by and
between Grantor as borrower and Beneficiary as lender, and
guaranteed by Mego Financial Corp.; and
(ii) A loan made by Beneficiary's affiliate, Textron Financial
Corporation, a Delaware corporation ("Lender") to Grantor's
subsidiary, Steamboat Suites, Inc. ("SSI"), in the amount of
up to $15,000,000, evidenced by a promissory note in such
amount dated November 30, 1995, guaranteed by Grantor, and
secured by, among other things, a deed of trust from SSI to
Textron dated October 5, 1994, as amended or restated, and
recorded in the Routt County Clerk and Recorder's office on
October 6, 1994, in Book 701 at Page No. 1795, a first
amendment to deed of trust from SSI to Textron dated February
27, 1995, and recorded in the Routt County Clerk and
Recorder's office on March 22, 1995 in Book 706 at Page 339, a
second amendment to deed of trust from SSI to Textron dated
November 29, 1996, and recorded in the Routt County Clerk and
Recorder's office on December 20, 1996 in Book 728 at Page
320, and as further amended or restated.
The indebtedness described in the foregoing clauses (i) and (ii) is
herein defined as the "Related Indebtedness", and the documents
described in the foregoing clauses (i) and (ii), together with the
referenced guaranties and any and all other documents or instruments
evidencing, securing or executed in connection with any of the
Related Indebtedness are herein collectively defined as the "Related
Loan Documents".
3
79
The Note, this Deed and the following instruments which evidence, secure
and/or relate to the loan evidenced by the Note are hereinafter referred to as
the "Security Documents:"
(a) Loan and Security Agreement dated of even date herewith by and
between Grantor as Borrower and Beneficiary as Lender (the "Loan
Agreement");
(b) Guaranty Agreement dated of even date herewith by Mego Financial
Corp. as guarantor (the "Guarantor") in favor of the Beneficiary
(the "Guaranty"); and
(c) All other documents, instruments or agreements now or hereafter
securing, evidencing and/or relating to the debt secured by the
Note, except for the Environmental Indemnity Agreement of even date
herewith from Grantor to Beneficiary.
Should the Indebtedness be paid according to the tenor and effect thereof
when the same shall become due and payable, and should Grantor perform all
covenants, terms and conditions herein contained in a timely manner, then this
conveyance shall be released, terminated and reconveyed to the persons entitled
thereto of record at the request and the expense of Grantor.
Grantor hereby further covenants and agrees as follows:
ARTICLE I
1.01 Payment of Indebtedness. Grantor will pay the Note according to the tenor
thereof and all other sums now or hereafter secured hereby promptly as the same
shall become due.
1.02 Taxes, Liens and Other Charges.
(a) In the event of the passage of any state, federal, municipal or
other governmental law, order, rule or regulation, subsequent to the
date hereof, in any manner changing or modifying the laws now in
force governing the taxation of the Indebtedness or this Deed or the
manner of collecting taxes with respect thereto so as to adversely
affect the Beneficiary (exclusive of any tax on Beneficiary's
income), Grantor will promptly pay any such tax. If Grantor fails to
make such prompt payment or if, in the reasonable opinion of the
Beneficiary, any such state, federal, municipal, or other
governmental law, order, rule or regulation prohibits Grantor from
making such payment or would penalize the Beneficiary if Grantor
makes such payment or if, in the reasonable opinion of the
Beneficiary, the making of such payment might result in the
imposition of interest beyond the maximum amount permitted by
applicable law, then the entire balance of the principal sum secured
by this Deed and all interest accrued thereon shall, at the option
of the Beneficiary, become immediately due and payable.
(b) Grantor will pay (to the extent same are not paid from the escrowed
funds provided for in Paragraph 1.04), before the same become
delinquent, all taxes, liens, assessments and charges of every
character including all utility charges, now or hereafter levied or
4
80
assessed upon the Premises; and upon demand will furnish the
Beneficiary receipted bills evidencing such payment.
(c) Grantor will not suffer or permit any mechanic's, materialman's,
laborer's, statutory or other lien to remain outstanding upon all or
any part of the Premises.
(d) Grantor, at its expense, may contest, after prior written notice to
Beneficiary, by appropriate legal proceedings conducted in good
faith and with due diligence, the amount, validity or application,
in whole or in part, of any taxes, liens, assessments or charges
levied or assessed upon the Premises or any mechanic's,
materialman's, laborer's, statutory or other lien filed against the
Premises, so long as such proceedings operate to prevent the
collection or other realization thereon, the sale or forfeiture of
the Premises or any part thereof to satisfy the same or the
impairment of Beneficiary's lien; provided that (i) during such
contest the Grantor shall, at the option of the Beneficiary, provide
Beneficiary with security satisfactory to the Beneficiary, assuring
the payment of any additional interest, charge, penalty or expense
arising from or incurred as a result of such contest, and (ii) if at
any time payment of any obligation imposed upon the Grantor under
this Paragraph 1.02 shall become necessary to prevent the sale or
forfeiture of the Premises or any part thereof to satisfy the same,
then Grantor shall pay the same in sufficient time to prevent sale
or forfeiture.
1.03 Insurance.
(a) Grantor shall deliver to and maintain for the benefit of the
Beneficiary during the term of this Deed, original paid up insurance
policies (or certified copies thereof) of acceptable insurance
companies, in amounts, in form and in substance, and with expiration
dates all reasonably acceptable to the Beneficiary and containing a
waiver of subrogation rights by the insuring company,
non-contributory standard mortgage benefit clause, or their
equivalents, and a mortgage loss payable endorsement in favor of and
satisfactory to the Beneficiary and breach of warranty coverage,
providing the following types of insurance on the Premises:
(i) unless waived in writing by Beneficiary, insurance against
loss or damage by hazards as are customarily insured against
with respect to unimproved land (or, if the Land is
subsequently improved, then as are customarily insured against
with respect to improved land) as are presently included in
so-called "all risk extended coverage" and against other such
insurable hazards as, under good insurance practices, from
time to time are insured against for properties of similar
character and location. The amount of the foregoing insurance
shall not be less than the greater of (a) the full replacement
value of the Premises including any or all improvements and
personal property now or hereafter thereon, or (b) the
aggregate of the face amount of the Indebtedness plus any
other debt encumbering the Premises, provided, however, that
nothing herein shall be deemed to require insurance in excess
of amounts available from one or more insurance companies
5
81
acceptable to Beneficiary pursuant to Section 1.03(a); and
said policies of insurance shall provide for a deductible
acceptable to the Beneficiary, provide for breach of warranty
coverage, replacement cost endorsements satisfactory to the
Beneficiary, and shall not permit co-insurance;
(ii) such other insurance on the Premises or any replacements or
substitutions therefor, including public/general liability
and, if the Land is subsequently improved, property damage
insurance in an amount reasonably satisfactory to the
Beneficiary, and flood insurance (if the Premises are or
become located in an area which is considered a flood risk by
the U.S. Department of Housing and Urban Development), and in
such amounts as may from time to time be reasonably required
by the Beneficiary against other insurable casualties which at
the time are commonly insured against in the case of premises
similarly situated, due regard being given to the height and
type of the improvements, their construction, location, use
and occupancy, or any replacements or substitutions therefor.
(b) The Beneficiary is hereby authorized and empowered, at its option,
to adjust or compromise any loss under any insurance policies
maintained pursuant to this Paragraph 1.03, and to collect and
receive the proceeds from any such policies. Each insurance company
is hereby authorized and directed to make payment for all such
losses directly to the Beneficiary, instead of to Grantor and the
Beneficiary jointly. In the event any insurance company fails to
disburse directly and solely to the Beneficiary but disburses
instead either solely to Grantor or to Grantor and the Beneficiary
jointly, Grantor agrees immediately to endorse and transfer such
proceeds to the Beneficiary. Upon the failure of Grantor to endorse
and transfer such proceeds as aforesaid, the Beneficiary may execute
such endorsements or transfers for and in the name of Grantor and
Grantor hereby unconditionally and irrevocably appoints the
Beneficiary as Grantor's agent and attorney-in-fact, coupled with an
interest to endorse and transfer such proceeds to Beneficiary. After
deducting from said insurance proceeds all of its expenses incurred
in the collection and administration of such sums, including
attorneys' fees, the Beneficiary may apply the net proceeds or any
part thereof, at its option (i) to the payment of the Indebtedness,
whether or not due and in whatever order the Beneficiary elects,
(ii) to the repair and/or restoration of the Premises or (iii) for
any other purposes or objects for which the Beneficiary is entitled
to advance funds under this Deed; all without affecting the lien of
this Deed. The Beneficiary shall not be held responsible for any
failure to collect any insurance proceeds due under the terms of any
policy regardless of the cause of such failure.
(c) All insurance policies required pursuant to this Deed shall provide
that the coverage afforded thereby shall not expire or be amended,
canceled or otherwise terminated without at least thirty (30) days
prior written notice to the Beneficiary. At least thirty (30) days
prior to the expiration date of each policy maintained pursuant to
this Paragraph 1.03, a renewal or replacement thereof satisfactory
to the Beneficiary shall be delivered to the Beneficiary. Grantor
shall deliver to the Beneficiary receipts
6
82
evidencing the payment for all such insurance policies and renewals
or replacements. The delivery of any insurance policies hereunder
shall constitute an assignment of all unearned premiums as further
security hereunder. In the event of the foreclosure of this Deed or
any other transfer of title to the Premises in full or partial
extinguishment of the Indebtedness, all right, title and interest of
Grantor in and to all insurance policies then in force, to the
extent applicable to the Premises, shall pass to the purchaser or
grantee.
1.04 Monthly Deposits. From and after the occurrence of one or more Events of
Default under this Deed (subject to all applicable cure or grace periods), and
upon the written request of Beneficiary to Grantor, Grantor will deposit with
the Beneficiary, on the due date of each monthly installment under the Note, a
sum which, in the estimation of the Beneficiary, shall be equal to one-twelfth
(1/12) of the annual taxes, assessments and insurance premiums on or with
respect to the Premises. Said deposits shall be held by the Beneficiary, free of
interest, and free of any liens or claims on the part of creditors of Grantor
and as part of the security of the Beneficiary, and to be used by the
Beneficiary to pay current taxes, assessments and insurance premiums on the
Premises as the same are due. Said deposits shall not be trust funds but may be
commingled with the general funds of the Beneficiary. If said deposits are
insufficient to pay the taxes, assessments and insurance premiums in full as the
same become due, Grantor will deposit with the Beneficiary such additional sum
or sums as may be required in order for the Beneficiary to pay such taxes,
assessments and insurance premiums in full, in accordance with all applicable
law. Upon the occurrence of any default or Event of Default at any time when the
Beneficiary is in possession of such deposits, the Beneficiary may, at its
option, apply any of said deposits to the payment of the Indebtedness in such
manner as it may elect.
1.05 Condemnation. If all or any portion of the Premises shall be damaged or
taken through condemnation (which term when used in this Deed shall include any
damage or taking by any governmental authority and any transfer by private sale
in lieu thereof), either temporarily or permanently, then the entire
Indebtedness shall, at the option of the Beneficiary, become immediately due and
payable. The Beneficiary shall be entitled to receive all compensation, awards
and other payments or relief thereof, provided, however, that Grantor may
participate in any such condemnation proceedings to the extent of its interest
in the Premises and retain any such payments only to the extent of its interest
in the Premises remaining after the Beneficiary has received full compensation
for its interest in the Premises. The Beneficiary is hereby authorized, at its
option, to commence, appear in and prosecute, in its own or, subject to the
foregoing sentence, in Grantor's name, any action or proceeding relating to any
condemnation, and to settle or compromise any claim in connection therewith. All
such compensation, awards, damages, claims, rights of action and proceeds and
the right thereto are hereby assigned by Grantor to the Beneficiary. After
deducting from said condemnation proceeds all of its expenses incurred in the
collection and administration of such sums, including attorneys' fees, the
Beneficiary may apply the net proceeds or any part thereof, at its option:
(a) to the payment of the Indebtedness, whether or not due and in
whatever order the Beneficiary elects,
(b) to the repair and/or restoration of the Premises, or
7
83
(c) for any other purposes for which the Beneficiary is entitled to
advance funds under this Deed, all without affecting the lien or
priority of this Deed, and any balance of such moneys then remaining
shall be paid to Grantor. Grantor agrees to execute such further
assignment of any such compensation, awards, damages, claims, rights
of action and proceeds as the Beneficiary may require.
1.06 Care of Premises.
(a) Grantor will keep the buildings, parking areas, roads and walkways,
recreational facilities, landscaping and all other improvements of
any kind now or hereafter erected on the Land or any part thereof,
and the fixtures, furnishings and equipment therein and thereon, in
good condition and repair, will not commit or suffer any waste and
will not do or suffer to be done anything which will increase the
risk of fire or other hazard to the Premises or any part thereof.
(b) Grantor will not remove or demolish or alter the structural
character of any improvement located on the Land without the written
consent of the Beneficiary.
(c) If the Premises or any part thereof is damaged by fire or any other
cause, Grantor will give immediate written notice thereof to the
Beneficiary.
(d) The Beneficiary, Trustee or their respective representatives are
hereby authorized to enter upon and inspect the Premises at any time
during normal business hours or, upon an occurrence of an Event of
Default, at any time.
(e) Subject to Grantor's right of contest set forth in Section D.5 of
the Loan Agreement, Grantor will promptly comply with all present
and future laws, ordinances, rules and regulations of any
governmental authority affecting the Premises or any part thereof.
Grantor will deliver to the Beneficiary within ten (10) days after
Grantor's receipt thereof copies of any additional governmental
permits or approvals or disapprovals or notices that relate to any
matter that would materially adversely affect the Premises issued
with regard to the Premises or any portion thereof.
(f) If all or any part of the Premises shall be damaged by fire or other
casualty, Grantor will promptly restore the Premises to the
equivalent of its original condition; and if a part of the Premises
shall be damaged through condemnation, Grantor will promptly
restore, repair or alter the remaining portions of the Premises in a
manner satisfactory to the Beneficiary. Notwithstanding the
foregoing, Grantor shall not be obligated to so restore unless in
each instance, the Beneficiary agrees to make available to Grantor
(pursuant to a procedure satisfactory to the Beneficiary) any net
insurance or condemnation proceeds actually received by the
Beneficiary hereunder in connection with such casualty loss or
condemnation, to the extent such proceeds are required to defray the
expense of such restoration; provided, however, that the
unavailability or insufficiency of any such insurance or
condemnation proceeds to defray the entire expense of
8
84
restoration shall in no way relieve Grantor of its obligation to
restore. In the event all or any portion of the Premises shall be
damaged or destroyed by fire or other casualty or by condemnation,
Grantor shall promptly deposit with the Beneficiary a sum equal to
the amount by which an architect's estimate (acceptable to
Beneficiary) of cost of the restoration of the Premises exceeds the
actual net insurance or condemnation proceeds received by the
Beneficiary in connection with such damage or destruction.
1.07 Leases and Other Agreements Affecting Property. Grantor will duly and
punctually perform all terms, covenants, conditions and agreements binding upon
it under any lease, sublease, rental agreement, occupancy agreement or any other
agreement of any nature whatsoever which involves or affects the Premises or any
part thereof if such failure to perform would have a materially adverse effect
on the Premises or Grantor's ability to repay or perform the Indebtedness.
Grantor will furnish the Beneficiary with executed copies of all leases,
subleases, rental agreements or occupancy agreements now or hereafter created
upon the Premises or any part thereof. Grantor will not, without the express
written consent of the Beneficiary, enter into any lease, sublease or occupancy
agreements with respect to the Premises or any portion thereof; provided,
however, that the Beneficiary's prior written consent shall not be required with
respect to the entering into, modification or termination of any occupancy
agreement for any of the Premises consisting of a portion of any legally
subdivided parcel and having a term of less than sixty (60) days. Grantor will
not, without the express written consent of the Beneficiary, terminate or modify
either orally or in writing, any lease, sublease, rental agreement or occupancy
agreement now existing or hereafter created upon the Premises or any part
thereof, nor will Grantor permit any assignment or a subletting by any Tenant
without the prior express written consent of the Beneficiary. Grantor will not
accept payment of rent more than one (1) month in advance without the prior
express written consent of the Beneficiary. In order to further secure payment
of the Note and the observance, performance and discharge of Grantor's
obligations, Grantor hereby assigns, transfers and sets over unto the
Beneficiary, and grants the Beneficiary a security interest in, all of Grantor's
right, title and interest in, to and under all leases, subleases, rental
agreements, occupancy agreements, licenses, concessions, entry fees, other
agreements which grant a possessory interest and other contracts now or
hereafter affecting the Premises or any part thereof and in and to all of the
rents, issues, profits, revenues, proceeds, awards and other benefits now or
hereafter arising from the use and enjoyment of the Premises or any part
thereof; provided, however, that Beneficiary hereby licenses back to Grantor the
right to collect the same unless and until an Event of Default has occurred
hereunder.
1.08 Security Agreement and Fixture Filing. Insofar as (i) any of the property
listed in paragraphs (b) through (e) on pages 1 and 2 hereof and, (ii) all other
personal property in any way connected with the use or enjoyment of the Premises
(hereinafter all collateral defined in Sections (i) and (ii) hereof shall be
collectively referred to as "Collateral") this Deed, in compliance with the
provisions of the Uniform Commercial Code as enacted in the State of Nevada as
it may be amended from time to time (the "UCC"), is hereby made and declared to
be: (x) a security agreement, encumbering the Collateral and (y) a fixture
filing. Grantor does hereby grant to the Beneficiary a continuing lien and
security interest in and to all of said Collateral and all replacements,
substitutions, additions and proceeds thereof and all after-acquired property
relating thereto. A financing statement or statements reciting this Deed to be a
security agreement, affecting all of said
9
85
Collateral aforementioned, shall be executed by Grantor and the Beneficiary and
appropriately filed. Grantor covenants and agrees that, prior to changing its
name, identity or structure, it will so notify the Beneficiary and will promptly
execute any financing statements or other instruments deemed necessary by the
Beneficiary to prevent any filed financing statement from becoming seriously
misleading or losing its perfected status. The remedies for any violation of the
covenants, terms and conditions of the security agreement herein contained shall
be (i) as prescribed herein, or (ii) as prescribed by general law, or (iii) as
prescribed by the specific statutory consequences now or hereafter enacted and
specified in the UCC, all at the Beneficiary's sole election. Grantor and the
Beneficiary agree that the filing of such financing statement(s) in the records
normally having to do with personal property shall never be construed in anywise
derogating from or impairing this declaration and hereby stated intention of
Grantor and the Beneficiary that everything used in connection with the
production of income from the Premises, adapted for use therein, and/or which is
described in this Deed, is, and at all times and for all purposes and in all
proceedings both legal or equitable shall be, regarded as part of the real
estate irrespective of whether (a) any such item is physically attached to the
improvements, (b) serial numbers are used for the better identification of
certain items capable of being thus identified in a recital contained herein, or
(c) any such item is referred to or reflected in any such financing statement(s)
so filed at any time. Similarly, the mention in any such financing statement(s)
of the rights in and to (aa) the proceeds of any insurance policy relating to
the Premises, or (bb) any award in eminent domain proceedings for a taking or
for loss of value, or (cc) Grantor's interest as lessor in any present or future
lease, sublease, or rights to income growing out of the use and/or occupancy of
the Premises, whether pursuant to lease, sublease, or otherwise, shall never be
construed as in anywise altering any of the rights of the Beneficiary as
determined by this instrument or impugning the priority of the Beneficiary's
lien granted hereby or by any other recorded document, but such mention in such
financing statement(s) is declared to be for the protection of the Beneficiary
in the event any court shall at any time hold with respect to the foregoing
(aa), (bb) or (cc), that notice of the Beneficiary's priority of interest to be
effective against a particular class of persons, must be filed in the UCC
records. The information contained herein is provided in order that this Deed
shall comply with the requirements of the UCC for instruments to be filed as
financing statements. The "Debtor" is the Grantor hereunder; the "Secured Party"
is the Beneficiary herein, the principal place of business of the "Debtor" is as
set forth on Page 1 of this Deed, the mailing addresses of the "Debtor and
"Secured Party" are as set forth on Page 1 of this Deed, and the types or items
of collateral are as described hereinabove.
1.09 Further Assurances; After Acquired Property. At any time, and from time to
time, upon request by the Beneficiary, Grantor will make, execute and deliver or
cause to be made, executed and delivered, to the Beneficiary and, where
appropriate, cause to be recorded and/or filed and from time to time thereafter
to be re-recorded and/or refiled at such time and in such offices and places as
shall be deemed desirable by the Beneficiary, any and all such other and further
deeds to secure debt, security agreements, financing statements, continuation
statements, instruments of further assurance, certificates and other documents
as may, in the reasonable opinion of the Beneficiary, be necessary or desirable
in order to effectuate, complete, or perfect, or to continue and preserve (a)
the obligation of Grantor under the Note and under this Deed, and (b) the lien
of this Deed as a lien upon and security title in and to all of the Premises,
whether now owned or hereafter acquired by Grantor. Upon any failure by Grantor
so to do, the Beneficiary may make, execute, record, file, re-record
10
86
and/or refile any and all such deeds to secure debt, deeds of trust, security
agreements, financing statements, continuation statements, instruments,
certificates, and documents for and in the name of Grantor and Grantor hereby
irrevocably appoints the Beneficiary the agent and attorney-in-fact of Grantor
so to do. The lien hereof will automatically attach, without further act, to all
after acquired property attached to and/or used in the operation of the Premises
or any part thereof.
1.10 Expenses.
(a) If any action or proceeding is commenced regarding the Premises or
the Loan and to which action or proceeding the Beneficiary or the
Trustee is made a party or in which it becomes necessary to defend
or uphold the lien of this Deed, the Grantor shall, on demand,
reimburse the Beneficiary and the Trustee for all expenses
(including, without limitation, reasonable attorneys' fees and
appellate attorneys' fees) incurred by the Beneficiary and/or the
Trustee in any such action or proceeding. In any action or
proceeding to foreclose this Deed or to recover or collect all or
any portion of the Indebtedness, the provisions of law relating to
the recovering of costs, disbursements and allowances shall remain
unaffected by this covenant.
(b) Subject to the contest rights of Grantor set forth in Section D.5 of
the Loan Agreement, the Grantor shall pay when due all payments and
charges on all liens, encumbrances, ground and other leases, and
security interests which may be or become superior or inferior to
the lien of this Deed, and, if Grantor shall not make such payments
within five (5) days following receipt of written notice of
Grantor's failure to pay from Beneficiary (unless circumstances
require that the Beneficiary make any such payment(s) immediately in
order to protect its secured interest and/or lien in any of the
Premises), the Beneficiary shall have the right, but shall not be
obligated, to pay such payments and charges and the Grantor shall,
on demand, reimburse the Beneficiary for amounts so paid. In
addition, upon default of the Grantor in the performance of any
other terms, covenants, conditions or obligations by it to be
performed under any such prior or subordinate lien, encumbrance,
lease or security interest, the Beneficiary shall have the right,
but shall not be obligated, to cure such default in the name and on
behalf of the Grantor. All sums advanced and reasonable expenses
incurred at any time by the Beneficiary pursuant to this Paragraph
1.10 or as otherwise provided under the terms and provisions of this
Deed or under applicable law shall bear interest from the date that
such sum is advanced or expense incurred, to and including the date
of reimbursement, computed at an interest rate equal to the lesser
of the Default Rate under the Note, or the highest lawful contract
rate.
(c) The Grantor agrees to bear and pay all expenses (including
reasonable attorneys' fees and appellate attorneys' fees actually
incurred) of or incidental to the enforcement of any provision
hereof, or the enforcement, compromise or settlement of this Deed or
the Indebtedness, and for the curing thereof, or for defending or
asserting the rights and claims of the Beneficiary in respect
thereof, by litigation or otherwise. All rights and remedies of the
Beneficiary shall be cumulative and may be exercised singly or
11
87
concurrently. Notwithstanding anything herein contained to the
contrary, the Grantor, being an experienced developer and
participant in sophisticated real estate ventures, and having
consulted with counsel of its choosing: (a) hereby waives trial by
jury in any action brought by Beneficiary to enforce any provisions
of this Deed; (b) will not (i) at any time insist upon, or plead, or
in any manner whatever claim or take any benefit or advantage of any
stay or extension or moratorium law, any exemption from execution or
sale of the Premises or any part thereof, wherever enacted, now or
at any time hereafter in force, which may affect the covenants and
terms of performance of this Deed, nor (ii) claim, take or insist
upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisal of the Premises, or any
part thereof, prior to any sale or sales thereof which may be made
pursuant to any provision herein, or pursuant to the decree,
judgment or order of any court of competent jurisdiction, nor (iii)
after any such sale or sales, claim or exercise any right under any
statute heretofore or hereafter enacted to redeem the property so
sold or any part thereof; (c) hereby expressly waives all benefit or
advantage of any such law or laws referred to in subparagraph (b)
above; and (d) covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to the
Beneficiary, but to suffer and permit the execution of every power
as though no such law or laws had been made or enacted. The Grantor,
for itself and all who may claim under it, waives, to the extent
that it lawfully may, all right to have the Premises marshaled upon
any foreclosure hereof.
1.11 Estoppel Affidavits. Grantor, upon fifteen (15) days prior written notice,
shall furnish to the Beneficiary a written statement, duly acknowledged, setting
forth the unpaid principal of, and interest on, the Indebtedness and whether or
not any offsets or defenses are claimed to exist against such principal and
interest, and such other information as may be reasonably requested by the
Beneficiary.
1.12 Subrogation. The Beneficiary shall be subrogated to the claims and liens of
all parties whose claims or liens are discharged or paid with the proceeds of
the Indebtedness.
1.13 Books, Records, Accounts and Annual Reports. Grantor covenants and agrees
to deliver to Beneficiary such books, records, accounts and annual reports in
the form, at the times and containing such information as may be required to be
delivered by Grantor or SSI to Beneficiary pursuant to the terms and provisions
of any Related Loan Documents.
1.14 Limit of Validity. All agreements between the Grantor and the Beneficiary
are expressly limited so that in no contingency or event whatsoever, whether by
reason of advancement of the proceeds of the Note, acceleration of maturity of
the unpaid principal balance of the Note or otherwise, shall the amount paid or
agreed to be paid to the Beneficiary for the use, forbearance or detention of
the money to be advanced hereunder exceed the highest lawful rate permissible
under applicable usury laws. If, from any circumstances whatsoever, fulfillment
of any provision hereof or of the Security Documents shall involve transcending
the limit of validity prescribed by any law which a court of competent
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and, if from any
circumstance the
12
88
Beneficiary shall ever receive as interest an amount which would exceed the
highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance due under the Note and
not to the payment of interest. This provision shall control every other
provision of all agreements between the Grantor and the Beneficiary.
1.15 No Further Encumbrances. Grantor shall not, directly or indirectly
(including, without limitation, by equipment leasing or similar arrangements, or
by pledging or hypothecation of partnership interests in Grantor), further
encumber the Premises, or any part thereof, it being understood by Grantor that
the Premises, and all parts thereof, shall remain free and clear of any and all
debt instruments or other obligations for repayment of money except those given
in connection with the loan evidenced by the Note.
1.16 Restrictions on Transfers. Grantor shall comply with the following
restrictions on transfers, provided, however, that nothing in Paragraph 1.15
hereof or this Paragraph 1.16 shall be deemed to apply to, restrict or otherwise
limit to any degree any sale, transfer, encumbrance, hypothecation or other
assignment or transfer of any of the publicly traded stock of Mego Financial
Corp.:
(a) Grantor shall not, without first obtaining the prior written consent
of the Beneficiary (which consent may be given or withheld by the
Beneficiary in the Beneficiary's sole discretion), whether
voluntarily or involuntarily by operation of law or otherwise (i)
transfer, sell, convey or assign all or any portion of the Premises,
or contract to do any of the foregoing, including, without
limitation, options to purchase and installment sales contracts,
land contracts, real estate contracts or contracts for deed, (ii)
lease all or any portion of the Premises or change the legal
possession or use thereof, except as otherwise permitted pursuant to
Paragraph 1.07 hereof, or (iii) except as provided in this
Paragraph, permit the dilution, transfer, pledge, hypothecation or
encumbrance of any partnership interest of Grantor, or of any stock,
partnership or beneficial interests in any partner of Grantor which
is a corporation, partnership or a trust (exclusive of Grantor
limited partner transfers). Without limiting the generality of the
preceding sentence, the prior written consent of the Beneficiary
shall be required for (i) any transfer made to a subsidiary or
affiliate entity of Grantor, (ii) any transfer made to a
reconstituted general or limited partnership, (iii) transfers by any
partnership to its individual partners or vice versa, (iv) any
transfer by any corporation to its stockholders or vice versa, and
(v) any corporate merger or consolidation. In the event that the
Beneficiary, in the Beneficiary's sole discretion, is willing to
consent to a transfer which would otherwise be prohibited by this
Paragraph 1.16(a), the Beneficiary may condition its consent on such
terms as it desires, including, without limitation, an increase in
the interest rate of the Note (and recalculation of the amortization
provisions thereof), and the requirement that Grantor pay a transfer
fee, together with any expenses incurred by the Beneficiary in
connection with the granting of such consent (including, without
limitation, attorneys' fees).
(b) Notwithstanding anything contained in this Paragraph 1.16 to the
contrary, in the event that Grantor requests, prior to the maturity
or other repayment in full of the Indebtedness, that Beneficiary
consent to the transfer of and the release of the lien of this
13
89
Deed on any one or more of the five (5) parcels of Land, then, in
addition to the conditions that Beneficiary must grant its prior
written consent to such transfer and that no Event of Default or
circumstance that with the passage of time or giving of notice or
both would constitute an Event of Default shall then exist and be
continuing, Grantor shall also satisfy the following conditions to
any such release:
(i) Grantor shall pay to Beneficiary a release payment equal to at
least the greater of (x) fifty percent (50%) of the total
stated purchase price for the applicable parcel of Land
(including any deferred, contingent or earn-out portions
thereof or any additional consideration to be paid by the
purchaser or transferee subsequent to the closing of the
acquisition of the applicable parcel of Land); or (y) fifty
percent (50%) of the following appraised values of such
parcels of Land:
Parcel 1 on Exhibit "A": $ 780,000.00
Parcel 2 on Exhibit "A": 785,000.00
Parcel 3 on Exhibit "A": 3,760,000.00
Parcel 4 on Exhibit "A": 3,050,000.00
Parcel 5 on Exhibit "A": 3,925,000.00
Notwithstanding the foregoing, if an Event of Default or
circumstance that with the passage of time or giving of notice
or both would constitute an Event of Default shall then exist
and be continuing, Beneficiary may in its sole discretion
require that any such release payment be increased. No
additional release payment shall be payable upon the repayment
and satisfaction in full of the Indebtedness.
(ii) The Maximum LTV Ratio (as defined in Section A.2(g) of the
Loan Agreement) shall not, after any such transfer and release
payment to Beneficiary, exceed 50%.
(c) If Grantor violates the terms of Paragraph 1.16 hereof, in addition
to any other rights or remedies which Grantor may have herein, in
any other Security Document, or at law or in equity, Beneficiary may
increase the interest rate charged on the Indebtedness up to the
Default Rate, such interest being due on demand and being secured by
this Deed.
1.17 Representations and Warranties. As a special inducement to the Beneficiary
to make the loan evidenced by the Note, and with knowledge that the Beneficiary
will rely thereon, Grantor represents and warrants to the Beneficiary as
follows:
(a) There exist no leases or subleases, occupancy agreements or similar
arrangements affecting all or any portion of the Premises other than
those identified on Exhibit "C" attached hereto and by this
reference made a part hereof;
(b) There are no license, franchise, commission, management, service,
maintenance, or other contracts or agreements in existence affecting
in any way the operation,
14
90
maintenance or conduct of business at the Premises other than those
identified on Exhibit "C".
(c) There are no equipment leases, rental agreements or similar
arrangements affecting in any way the operating, maintenance or
conduct of business at the Premises other than those identified on
Exhibit "C".
(d) All licenses, permits and other approvals necessary or appropriate
for conduct of the business carried out at the Premises have been
obtained by Grantor and same are current and in full force and
effect.
(e) All sales and payroll tax obligations of Grantor which are due and
payable have been satisfied.
(f) There are no UCC Financing Statements which affect or encumber any
portion of the Premises or any other security for the Indebtedness
other than those in favor of Beneficiary or its affiliates.
1.18. Environmental Matters. Grantor warrants that (a) to the best of Grantor's
knowledge, the Premises do not contain any Hazardous Material the presence of
which would violate any Environmental Law, as hereinafter defined, (b) Grantor
has not received any notice from any governmental agency, entity or other person
with regard to Hazardous Materials on or affecting the Premises, and (c) to the
best of Grantor's knowledge, neither Borrower nor the Premises, or any portion
thereof are in violation of any applicable Environmental Laws, as hereinafter
defined, relating to or affecting the Premises or Grantor. Grantor hereby
indemnifies and agrees to defend and hold the Beneficiary harmless from and
against any and all liens, damages, losses, liabilities, obligations, fines,
penalties, claims, litigation, demands, judgments, suits, proceedings, costs,
disbursements, response costs, or expenses of any kind or nature whatsoever
(including, without limitation, attorneys', consultants' and experts' fees and
expenses) (except to the extent that any of the foregoing are caused by any
gross negligence or wilful misconduct of Beneficiary) which may at any time
(whether prior to or after foreclosure of this Deed and whether prior to or
after payment of the Note) be imposed upon, incurred by or asserted or awarded
against Grantor, the Beneficiary or the Premises and arising directly or
indirectly from or out of (i) the presence of any Hazardous Materials at any
time on, in, under or affecting all or any portion of the Premises, regardless
of whether or not caused by or within the control of Grantor, (ii) the violation
or alleged violation of any Environmental Law with respect to the Premises or
any portion thereof, and (iii) any attempts by the Beneficiary to enforce the
foregoing rights. The foregoing rights shall include, without limitation, the
cost of removal of any and all Hazardous Materials from all or any portion of
the Premises or any surrounding areas, additional costs required to take
necessary precautions to protect against the discharge, spillage, emission,
leakage, seepage or release of Hazardous Materials on, in, under or affecting
the Premises or into the air, water, or soil, and costs incurred to comply with
Environmental Laws in connection with all or any portion of the Premises or any
surrounding areas. For purposes of this Deed, "Hazardous Material" or "Hazardous
Materials" means and includes petroleum products, flammable explosives,
radioactive materials, asbestos or any material containing
15
91
asbestos, polychlorinated biphenyls, and/or any hazardous, toxic or dangerous
waste, substance, element, compound, mixture, solution, pollutant or material
now or hereafter defined as such, or as a hazardous substance, or any similar
term, by or in any Environmental Law. For purposes of this Deed, "Environmental
Law" or "Environmental Laws" shall mean any law commonly referred to or
generally known as "Superfund" or "Superlien" law, or any other federal, state
or local statute, law, ordinance, code, rule, regulation, order or decree,
regulating, relating to or imposing liability or standards of conduct
concerning, any hazardous materials as may now or at any time hereafter be in
effect, including without limitation, the following as the same may be amended
or replaced from time to time, and all regulations promulgated thereunder or in
connection therewith: the Superfund Amendments and Reauthorization Act of 1986;
the Comprehensive Environmental Response, Compensation and Liability Act of
1980; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act;
the Resource Conservation and Recovery Act as amended by the Solid Waste
Disposal Act; the Safe Drinking Water Act; the Emergency Planning and Community
Right to Know Act of 1986; the Hazardous Materials Transportation Act; and the
Endangered Species Act.
1.19 Use of Premises. Grantor represents and warrants that as of the date of
this Deed, the Premises are vacant (except for any occupancy agreement permitted
pursuant to Paragraph 1.07 hereof), and consist of undeveloped land. Grantor
covenants that Grantor will not allow any other uses on the Premises unless
Beneficiary has given its prior written consent thereto.
ARTICLE II
2.01 Events of Default. The terms "Event of Default" or "Events of Default",
wherever used in this Deed, shall mean any one or more of the following events:
(a) Failure by Grantor to pay any sum within five (5) days after its due
date and, upon the first occurrence only of any such failure to pay,
written notice from Beneficiary that payment is due under the Note,
this Deed, or any payment of tax or insurance premium when due; or
(b) Failure by Grantor to duly observe, comply with or perform within
twenty (20) days after written notice of such failure is given to
Grantor, any other term, covenant, condition or agreement of this
Deed not requiring the payment of money by Grantor except Paragraphs
1.15 and 1.16; or
(c) The occurrence of a default or event of default under or failure by
Grantor or any Guarantor to perform any of its or their obligations
under any of the Security Documents, which is not cured within any
applicable cure period; or
(d) Any warranty or representation of Grantor contained in this Deed or
in any other instrument, document, transfer, conveyance, assignment,
loan agreement or financial statement given by Grantor with respect
to the Indebtedness secured hereby, is incomplete, untrue or
misleading in any material respect; or
16
92
(e) The filing by Grantor, its general partners (if any) or any
Guarantor of a voluntary petition in bankruptcy or adjudication of
Grantor or any Guarantor as a bankrupt or insolvent, or the filing
by Grantor or any Guarantor of any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself
under any present or future federal, state or other law or
regulation relating to bankruptcy, insolvency or other relief for
debtors, or the seeking or consenting to or acquiescing in the
appointment of any trustee, receiver or liquidator of Grantor or any
Guarantor or of all or any substantial part of the Premises or of
any or all of the rents, issues, profits or revenues thereof, or the
making by Grantor or any Guarantor of any general assignment for the
benefit of creditors, or the admission in writing by Grantor or any
Guarantor of its inability to pay its debts generally as they become
due; or
(f) The entry by a court of competent jurisdiction of an order, judgment
or decree approving a petition, filed against Grantor or any
Guarantor, seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other relief under any
present or future federal, state or other law or regulation relating
to bankruptcy, insolvency or other relief for debtors, which order,
judgment or decree remains unvacated and unstayed for an aggregate
of sixty (60) days (whether or not consecutive) from the date of
entry thereof, or the appointment of any trustee, receiver or
liquidator of Grantor, or any Guarantor, or of all or any
substantial part of the Premises or of any or all of the rents,
issues, profits or revenues thereof without the consent or
acquiescence of Grantor, which appointment shall remain unvacated
and unstayed for an aggregate of sixty (60) days (whether or not
consecutive); or
(g) Failure by Grantor to comply with the terms of Paragraphs 1.15 or
1.16 hereof; or
(h) The termination, liquidation or dissolution of Grantor; or
(i) Failure to maintain or cause any occupant of any portion of the
Premises to maintain, any license, permit, or contract necessary or
appropriate for conduct of any business now or hereafter being
operated at the Premises which would have a material adverse effect
on the Premises or any business conducted thereon by Grantor; or
(j) Any default or event of default occurs under any Related Loan
Documents or otherwise with respect to the Related Indebtedness, and
the same is continuing after lapse of any applicable grace or cure
period; or
(k) Any default continuing after the expiration of any applicable cure
or grace period under any other note or mortgage, evidencing or
securing indebtedness of an entity affiliated with Grantor in favor
of the Beneficiary or its affiliates.
2.02 Acceleration of Maturity. If any Event of Default shall have occurred
(subject to any applicable grace or cure period), then the entire Indebtedness
shall, at the option of the Beneficiary,
17
93
immediately become due and payable without notice or demand, time being of the
essence of this Deed; and no omission on the part of the Beneficiary to exercise
such option when entitled to do so shall be construed as a waiver of such right.
2.03 Beneficiary's Right to Enter and Take Possession, Operate and Apply
Revenues.
(a) If any Event of Default shall have occurred (subject to any
applicable grace or cure period), Grantor upon demand of the
Beneficiary, shall forthwith surrender to the Beneficiary the actual
possession of the Premises, and if, and to the extent, permitted by
law, the Beneficiary itself, or by such officers or agents as it may
appoint, may enter and take possession of all the Premises without
the appointment of a receiver, or an application therefor, and may
exclude Grantor and its agents and employees wholly therefrom, and
may have joint access with Grantor to the books, papers and accounts
of Grantor regarding the Premises.
(b) If Grantor shall for any reason fail to surrender or deliver the
Premises or any part thereof after such demand by the Beneficiary,
the Beneficiary may obtain a judgment or decree conferring upon the
Beneficiary the right to immediate possession or requiring Grantor
to deliver immediate possession of the Premises to the Beneficiary,
to the entry of which judgment or decree Grantor hereby specifically
consents. Grantor will pay to the Beneficiary, upon demand, all
expenses of obtaining such judgment or decree, including reasonable
compensation to the Beneficiary, its attorneys and agents; and all
such expenses and compensation shall, until paid, be secured by the
lien of this Deed.
(c) Upon every such entering upon or taking of possession, the
Beneficiary may hold, store, use, operate, manage and control the
Premises and conduct the business thereof, and, from time to time
(i) make all necessary and proper maintenance, repairs, renewals,
replacements, additions, and improvements thereto and thereon and
purchase or otherwise acquire additional fixtures, personalty and
other property; (ii) insure or keep the Premises insured; (iii)
manage and operate the Premises and exercise all the rights and
powers of Grantor to the same extent as Grantor could in its own
name or otherwise with respect to the same; and (iv) enter into any
and all agreements with respect to the exercise by others of any of
the powers herein granted the Beneficiary, all as the Beneficiary
from time to time may determine to be in its best interest. In such
event, the Beneficiary may collect and receive all the rents,
issues, profits and revenues from the Premises, including those past
due as well as those accruing thereafter, and shall have the benefit
of all operating expenses and deposits prepaid by Grantor, and,
after deducting (aa) all out-of-pocket and administrative expenses
of taking, holding, managing and operating the Premises (including
compensation for the services of all persons employed for such
purposes); (bb) the cost of all such maintenance, repairs, renewals,
replacements, additions, improvements, purchases and acquisitions;
(cc) the cost of such insurance; (dd) such taxes, assessments and
other similar charges as the Beneficiary may at its option pay; (ee)
other proper charges upon the Premises or any part thereof; and (ff)
the reasonable compensation, expenses and disbursements of the
18
94
attorneys and agents of the Beneficiary, and (gg) the payment of
deposits required in Paragraph 1.04, the Beneficiary shall apply the
remainder of the moneys so received by the Beneficiary as set forth
in the Note.
(d) Whenever all Events of Default have been cured pursuant to the terms
and conditions of any applicable Loan Document, and if the
Beneficiary in the Beneficiary's sole discretion shall have accepted
such cure, the Beneficiary shall surrender possession of the
Premises to Grantor, its successors or assigns. The same right of
taking possession, however, shall exist if any subsequent Event of
Default shall occur and be continuing.
2.04 Performance by the Beneficiary of Defaults by Grantor. If Grantor shall
default in the payment, performance or observance of any term, covenant or
condition of this Deed, the Beneficiary may, at its option, without waiving the
right to accelerate the maturity of the Indebtedness, pay, perform or observe
the same if Grantor shall not make such payment or perform or observe any such
term, covenant or condition within five (5) days following receipt of written
notice of Grantor's failure to pay, perform or observe from Beneficiary (unless
circumstances require that the Beneficiary make any such payment or perform or
observe any such term, covenant or condition immediately in order to protect its
secured interest and/or lien in any of the Premises). The Beneficiary shall
determine in its reasonable discretion the necessity for any such actions and of
the amounts to be paid. The Beneficiary is hereby empowered to enter and to
authorize others to enter upon the Premises or any part thereof for the purpose
of performing or observing any such defaulted term, covenant or condition
without thereby becoming liable to Grantor or any person in possession holding
under Grantor.
2.05 Receiver. If an Event of Default shall have occurred, the Beneficiary, upon
application to a court of competent jurisdiction, shall be entitled without
notice and without regard to the occupancy or value of any security for the
Indebtedness or the solvency of any party bound for its payment, to the
appointment of a receiver to take possession of and to operate the Premises and
to collect, apply and use the rents, issues, profits and revenues thereof,
including those past due as well as those accruing thereafter, and said receiver
shall have the benefit of all operating expenses and deposits prepaid by Grantor
it being acknowledged by Grantor that if an Event of Default shall have
occurred, that Beneficiary shall have the right to the Premises and that the
Premises and the rents and profits therefrom in such event will be in danger of
being lost, or materially injured or impaired. The receiver shall have all of
the rights and powers permitted under the laws of the state wherein the Land is
situated. Grantor will pay to the Beneficiary upon demand all reasonable
expenses, including receiver's fees, attorney's fees, costs and agent's
compensation, incurred pursuant to the provisions of this Paragraph 2.05; and
all such expenses shall be secured by this Deed.
2.06 Enforcement.
(a) Upon the occurrence of an Event of Default, the Beneficiary may take
such action in accordance with all applicable law, without notice or
demand, as it deems advisable to protect and enforce its rights
against the Grantor and to the Premises, including, but not limited
to, the following actions, each of which may be pursued concurrently
or
19
95
otherwise, at such time and in such order as the Beneficiary may
determine, in its sole discretion, and to the fullest extent
permitted by applicable law, without impairing or otherwise
affecting the other rights and remedies of the Beneficiary: (1)
exercise the rights granted in Paragraphs 2.02 through 2.05 hereof,
(2) exercise the power of sale and/or institute proceedings for the
complete judicial foreclosure of this Deed; (3) with or without
entry, to the extent permitted and pursuant to the procedures
provided by applicable law, institute proceedings for the partial
foreclosure of this Deed for the portion of the Indebtedness then
due and payable, subject to the continuing lien of this Deed for the
balance of the Indebtedness not then due; (4) institute an action,
suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein or in the Note to
the extent permitted by applicable law; or (5) pursue such other
remedies as Beneficiary may have under applicable law.
(b) Upon the occurrence of an Event of Default and the election of the
Beneficiary to effect a trustee's sale of the Premises in lieu of
judicial foreclosure, then the Beneficiary may instruct the Trustee
to commence such sale and consummate such sale in the following
manner:
The Trustee shall sell the Premises at public auction for
cash, after having first given such notice of hearing as to
the commencement of foreclosure proceedings and obtaining such
findings or leave of court as may be then required by law in
giving such notice and advertising the time and place of such
sale in such manner as may be provided by law, and upon such
and any resales and upon compliance with the law then relating
to foreclosure proceedings, to convey title to purchaser as
hereinafter set forth.
The Trustee shall deliver to the purchaser at any such
Trustee's sale its deed, without warranty, which shall convey
to the purchaser the interest in the Premises which the
Grantor has or has the power to convey at the time of the
execution of this Deed, and such as it may have acquired
hereafter. The Trustee's deed shall recite the facts showing
that the sale was conducted in compliance with all the
requirements of law and of this Deed, which recital shall be
prima facie evidence of such compliance and conclusive
evidence thereof in favor of bona fide purchasers and
encumbrances.
(c) The proceeds of any sale made under this Article II, together with
any other sums which then may be held by the Beneficiary under this
Deed, whether under the provisions of this Article II or other
otherwise, shall be applied as follows, subject to the requirements
of all applicable law:
First: To the payment of the cost and expenses of any such sale,
including reasonable compensation to the Beneficiary, its agents and
counsel, of the cost and expenses of any judicial proceedings
wherein the same may be made, of any reasonable trustee's
commission, and a reasonable auctioneer's fee if such expense has
been incurred.
20
96
Second: To payment of taxes due and unpaid on the property sold,
unless the notice of sale provided that the property be sold subject
to taxes thereon and the property was so sold.
Third: To payment of all reasonable expenses, liabilities and
advances made or incurred by the Beneficiary under this Deed,
together with interest as provided herein on all advances made by
the Beneficiary.
Fourth: To the payment of the whole amount then due, owing or unpaid
under the Indebtedness.
Fifth: To the payment of the surplus, if any, to whomever may be
lawfully entitled to receive the same.
The Beneficiary and any receiver of the Premises, or any part
thereof, shall be liable to account for only those rents, issues,
profits and proceeds actually received by it.
(d) In case of a sale under this Deed, the Premises, real, personal and
mixed, may be sold in one parcel or more than one parcel.
(e) The purchaser of the Premises sold pursuant to this Deed may, during
any redemption period allowed to Grantor or any other party, make
such repairs or alterations on said property as may be reasonably
necessary for the proper operation, care, preservation, protection
and insuring thereof. Any sums so paid together with interest
thereon from the time of such expenditure at the rate of the lesser
of the Default Rate under the Note or the highest lawful contract
rate shall be added to and become a part of the amount required to
be paid for redemption from such sale.
(f) Upon any sale made under this Deed, the Beneficiary may bid for and
acquire the Premises or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting
upon the Indebtedness the net sale price after deducting therefrom
the expenses of the sale and the costs of the action and any other
sums which the Beneficiary is authorized to deduct under this Deed.
(g) No recovery of any judgment by the Beneficiary and no levy of an
execution under any judgment upon the Premises or upon any other
property of the Grantor shall affect in any manner or to any extent,
the lien of this Deed upon the Premises or any part thereof, or any
liens, rights, powers or remedies of the Beneficiary hereunder, but
such liens, rights, powers, and remedies of the Beneficiary shall
continue unimpaired as before.
(h) In the event of any sale made under or by virtue of this Deed the
entire Indebtedness secured hereby, if not previously due and
payable, immediately thereupon shall,
21
97
anything in the Note or in this Deed to the contrary
notwithstanding, become due and payable.
2.07 Interest After Default. If any payment due hereunder is not paid when due,
subject to any applicable grace or cure periods, then and in such event, the
Grantor shall pay interest thereon from and after the date on which such payment
first becomes due at the Default Rate provided in the Note and such interest
shall be due and payable, on demand, whether or not any action shall have been
taken or proceeding commenced to recover the same or to foreclose this Deed.
Nothing in this Paragraph 2.07 or in any other provision of this Deed shall
constitute an extension of the time of payment of the Indebtedness.
2.08 Grantor's Actions After Default. After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceeding by the Beneficiary to obtain judgment for the Indebtedness, or any
portion thereof, or of any other nature in and of the enforcement of the Note or
of this Deed, the Grantor will, if required by the Beneficiary, consent to the
appointment of a receiver or receivers of the Premises and of all the earnings,
revenues, rents, issues, profits and income thereof.
2.09 Control By Beneficiary After Default. Notwithstanding the appointment of
any receiver, liquidator or trustee of the Grantor, or of any of its property,
or of the Premises or any part thereof, the Beneficiary shall be entitled to
retain possession and control of all property now and hereafter covered by this
Deed.
2.10 Waiver of Appraisement, Valuation, Stay, Execution and Redemption Laws.
Grantor agrees to the full extent permitted by law, that in the case of a
default on the part of Grantor hereunder, neither Grantor nor anyone claiming
through or under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension, homestead, exemption or redemption
laws now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Deed, or the absolute sale of the Premises, or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchasers thereof, and Grantor, for itself and all who may at any time claim
through or under it, hereby waives to the full extent that it may lawfully so
do, the benefit of all such laws, and any and all right to have the assets
comprised in the security intended to be created hereby marshaled upon any
foreclosure of the lien hereof.
2.11 Remedies Cumulative. No right, power or remedy conferred upon or reserved
to the Beneficiary by this Deed is intended to be exclusive of any other right,
power or remedy, but each and every right, power and remedy shall be cumulative
and concurrent and shall be in addition to any other right, power and remedy
given hereunder now or hereafter existing at law or in equity or by statute to
the fullest extent permitted by law.
2.12 Waiver.
(a) No delay or omission of the Beneficiary or of any holder of the Note
to exercise any right, power or remedy accruing upon any default
shall exhaust or impair any such right,
22
98
power or remedy or shall be construed to be a waiver of any such
default, or acquiescence therein; and every right, power and remedy
given by this Deed to the Beneficiary may be exercised from time to
time and as often as may be deemed expedient by the Beneficiary. No
consent or waiver, express or implied, by the Beneficiary to or of
any breach or default by Grantor in the performance of the
obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance of
the same or any other obligations of Grantor hereunder. Failure on
the part of the Beneficiary to complain of any act or failure to act
or to declare an Event of Default, irrespective of how long such
failure continues, shall not constitute a waiver by the Beneficiary
of its rights hereunder or impair any rights, powers or remedies
arising by virtue of any breach or default by Grantor.
(b) If the Beneficiary (i) grants forbearance or an extension of time
for the payment of any sums secured hereby; (ii) takes other or
additional security for the payment of any sums secured hereby;
(iii) waives or does not exercise any right granted herein or in the
Note; (iv) releases any part of the Premises from the lien of this
Deed or otherwise changes any of the terms, covenants, conditions or
agreements of the Note or this Deed; (v) consents to the filing of
any map, plat or replat affecting the Premises; (vi) consents to the
granting of any easement or other right affecting the Premises; or
(vii) makes or consents to any agreement subordinating the lien
hereof, any such act or omission shall not release, discharge,
modify, change or affect the original liability under the Note, this
Deed or any other obligation of Grantor or any subsequent purchaser
of the Premises or any part thereof, or any maker, co-signer,
endorser, surety or guarantor except to the extent of any such
waiver, release or modification actually given; nor shall any such
act or omission preclude the Beneficiary from exercising any right,
power or privilege herein granted or intended to be granted in the
event of any default then made or of any subsequent default; nor,
except as otherwise expressly provided in an instrument or
instruments executed by the Beneficiary, shall the lien of this Deed
be altered thereby. In the event of the sale or transfer by
operation of law or otherwise of all or any part of the Premises,
the Beneficiary, without notice, is hereby authorized and empowered
to deal with any such vendee or transferee with reference to the
Premises or the Indebtedness, or with reference to any of the terms,
covenants, conditions or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without
in any way releasing or discharging any liabilities or obligations.
2.13 Suits to Protect the Premises. Beneficiary shall have the power, with at
least ten (10) days' prior written notice to Grantor (unless circumstances
require that Beneficiary act immediately without any such notice, as
determined by Beneficiary in its sole discretion):
(a) to institute and maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Premises by any acts
which may be unlawful or any violation of this Deed,
23
99
(b) to preserve or protect its interest in the Premises and in the
rents, issues, profits and revenues arising therefrom, and
(c) to restrain the enforcement of or compliance with any legislation or
other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order would impair the
security hereunder or be prejudicial to the interest of the
Beneficiary.
2.14 Beneficiary May File Proofs of Claim. In the case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Guarantor, Grantor, or any of them or any of their
creditors or property, the Beneficiary, to the extent permitted by law, shall be
entitled to file such proofs of claim and other documents as may be necessary or
advisable in order to have the claims of the Beneficiary allowed in such
proceedings for the entire amount due and payable by Grantor under this Deed at
the date of the institution of such proceedings and for any additional amount
which may become due and payable by Grantor hereunder after such date.
ARTICLE III
3.01 Credits Waived. Grantor will not claim nor demand nor be entitled to any
credit or credits against the Indebtedness for the taxes assessed against the
Premises or any part thereof, and no deductions shall otherwise be made or
claimed from the taxable value of the Premises or any part thereof by reason of
this Deed or the Indebtedness.
3.02 No Release. Grantor agrees that in the event the Premises are sold and the
Beneficiary enters into any agreement with the then owner of the Premises
extending the time of payment of the Indebtedness, or otherwise modifying the
terms hereof, Grantor shall continue to be liable to pay the Indebtedness
according to the tenor of any such agreement unless expressly released and
discharged in writing by the Beneficiary. Nothing in this Paragraph 3.02 shall
be deemed to be a waiver of Paragraph 1.16 hereof.
3.03 Successors and Assigns. The provisions and covenants of this Deed shall run
with the land, shall be binding on Grantor, and shall inure to the benefit of
and be binding upon Grantor and the Beneficiary and their respective heirs,
executors, legal representatives, successors and permitted assigns. Whenever a
reference is made in this Deed to Guarantor, the Trustee, Grantor or the
Beneficiary such reference shall be deemed to include a reference to the heirs,
executors, legal representatives, successors and permitted assigns thereof.
3.04 Terminology. All personal pronouns used in this Deed whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and vice versa. Titles and Articles are for
convenience only and neither limit nor amplify the provisions of this Deed
itself.
3.05 Severability. If any provision of this Deed or the application thereof to
any person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Deed and the
24
100
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
3.06 Applicable Law. Grantor agrees that this Deed shall be construed,
interpreted and enforced in accordance with the laws of the State of Nevada;
provided, however, that if any applicable conflict or choice of law rules would
choose the law of another state, Grantor waives such rules and agrees that
Nevada substantive, procedural and constitutional law shall nonetheless govern.
Notwithstanding any provision of this Deed, Note or any other agreement between
Grantor or Beneficiary, nothing in this Deed shall require the Grantor to pay,
or the Beneficiary to accept, interest in an amount which would subject the
Beneficiary to any penalty under applicable law. In the event that the payment
of any interest due hereunder would subject the Beneficiary to any penalty under
applicable law, then ipso facto the obligations of the Grantor to make payment
shall be reduced to the highest rate authorized under applicable law.
3.07 Notices, Demands and Requests. All notices, demands or requests provided
for or permitted to be given pursuant to this Deed must be in writing and shall
be deemed to have been properly given or served by depositing the same with a
nationally recognized overnight courier service or in the United States Mail,
postpaid and registered or certified return receipt requested, and addressed to
the addresses set forth on the first page hereof. All notices, demands and
requests shall be effective upon being deposited with a nationally recognized
courier service or, on the date that is two (2) business days after such
deposit, upon being deposited in the United States Mail. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice, demand or
request sent. By giving at least thirty (30) days written notice hereof, Grantor
or the Beneficiary shall have the right from time to time and at any time during
the term of this Deed to change their respective addresses.
3.08 Time of the Essence. Time is of the essence with respect to each and every
covenant, agreement and obligation of Grantor under this Deed.
3.09 Title Acts by Trustee. At any time upon written request of the Beneficiary,
payment of its fees and presentation of this Deed and the Note for endorsement
(in case of full reconveyance, for cancellation and retention) without affecting
the liability of any person for the payment of the Indebtedness secured by this
Deed, the Trustee may (a) consent to the making of any map or plat of the
Premises, (b) join in granting any easement or creating any restriction thereon,
(c) join in any subordination or other agreement affecting this Deed or the lien
or charge thereof, (d) reconvey, without warranty, all or any part of the
Premises. The grantee in any reconveyance may be described as the "person or
persons legally entitled thereto", and the recitals therein of any matters of
facts shall be conclusive proof of the truthfulness thereof. The Grantor agrees
to pay a reasonable Trustee's fee for full or partial reconveyance, together
with a recording fee for said reconveyance.
3.10 Successor Trustee. At the option of the Beneficiary, with or without any
reason, a successor or substitute trustee may be appointed by the Beneficiary
without any formality other than a designation in writing of a successor or
substitute trustee, who shall thereupon become vested with and succeed to all
the powers and duties given to the Trustee herein named, the same as if the
25
101
successor or substitute trustee had been named original Trustee herein; and such
right to appoint a successor or substitute trustee shall exist as often and
whenever the Beneficiary desires.
3.11 Acknowledgments by Grantor. Grantor acknowledges that the information set
forth on the cover hereof is incorporated herein by reference and that Grantor
has received a true copy of this Deed.
3.12 Releases. Section A.9 of the Loan Agreement provides for the release and
reconveyance of the lien of this Deed encumbering the Premises upon the
repayment and performance in full of the Indebtedness, subject to the conditions
set forth in said Section A.9, prior to the full repayment and performance of
the Related Indebtedness; provided, however and except that, if there exists
with respect to the Related Indebtedness at the time of repayment and
performance in full of the Indebtedness a default or event of default, or any
event or circumstance which with the passage of time or giving of notice would
become a default or event of default under the Related Loan Documents, then the
release and reconveyance of the lien of the Deed hereof shall not be granted by
Beneficiary for so long as any such default or event of default or such other
event or circumstance is continuing.
IN WITNESS WHEREOF, Grantor has executed this Deed under seal, as of
the day and year first above written.
PREFERRED EQUITIES CORPORATION,
a Nevada corporation
By : /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: President and COO
--------------------------------
26
102
STATE OF NEVADA )
) .ss
COUNTY OF ▇▇▇▇▇ )
This instrument was acknowledged before me on August 12, 1998 by ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ as President & COO of PREFERRED EQUITIES CORPORATION, a Nevada
corporation.
/s/ ▇▇▇▇ ▇. FAIR
---------------------------------
NOTARY PUBLIC
[NOTARY PUBLIC SEAL]
My Commission Expires: Oct. 30, 1998
27
103
EXHIBIT "A"
LEGAL DESCRIPTION
All that real property situated in the State of Nevada, County of ▇▇▇, bounded
and described as follows:
Parcel 1:
Lot One (1) Block One (1) of CALVADA VALLEY UNIT NO. 2 as shown by map recorded
October 5, 1970 as File No. 20291 in the Office of the County Recorder of ▇▇▇
County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 2:
Lot One hundred forty-eight (148) in Block Sixteen (16) of CALVADA VALLEY UNIT
NO. 6, as shown by map recorded February 5, 1973 as Document No. 36024 in the
Office of the County Recorder of ▇▇▇ County, Nevada.
EXCEPTING THEREFROM all of its right, title and interest in and to all of the
minerals, including gas, coal, oil and oil shales as disclosed by Deed recorded
January 10, 1961 in Book 43, Page 374, Official Records, ▇▇▇ County, Nevada.
Parcel 3:
Parcels One (1) and Three (3) of Parcel Map recorded May 24, 1983 as File No.
81177 and amended by Certificate of Amendment recorded June 14, 1983 as File No.
83144 and by Certificate of Amendment recorded December 12, 1983 as File No.
99135 and by Certificate of Amendment recorded March 16, 1992 as File No. 304864
of Official Records, ▇▇▇ County, Nevada.
Parcel 4:
Parcel Two (2) as shown by Parcel Map recorded April 26, 1994 as File No. 351410
of Official Records, ▇▇▇ County, Nevada.
Parcel 5:
Lot Forty (40) in Block Six (6) of AMENDED PLAT OF CALVADA VALLEY UNIT 6,
recorded December 28, 1993 as Document No. 345007 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
1
104
Lots Nineteen (19) and Nineteen A (19A) (to the extent of Preferred Equities
Corporation's reversionary interest in Lot Nineteen A (19A)) of Block Six (6) of
CALVADA VALLEY UNIT NO. 6, recorded February 5, 1973 as File No. 36024 of
Official Records, ▇▇▇ County, Nevada, more particularly described as Parcel
Nineteen (19) as shown on Parcel Map recorded January 6, 1983 as File No. 72610
of Official Records, ▇▇▇ County, Nevada.
Lot One (1) in Block Fifteen (15), Lots One hundred seventy-three (173) and One
hundred seventy-four (174) in Block Eleven (11) and Lot Three hundred
twenty-three (323) in Block Six (6) of CALVADA VALLEY UNIT NO. 6, as shown by
map recorded February 5, 1973 as Document No. 36024 in the Office of the County
Recorder of ▇▇▇ County, Nevada.
2
105
EXHIBIT "B"
PERMITTED ENCUMBRANCES
All Permitted Encumbrances are those items set forth in that certain
Commitment for Title Insurance dated July 8, 1998 as issued by Chicago Title
Insurance Company as items 1 and 2 (as to non-delinquent amounts), 3, 4, 5, 6,
7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18.
1
106
EXHIBIT "C"
LEASES, SUBLEASES, CONTRACTS AND AGREEMENTS
None.
1
107
[PEC LOGO]
PREFERRED EQUITIES CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ o 702.737.3700 o
Toll Free ▇.▇▇▇.▇▇▇.▇▇▇▇ o Fax ▇▇▇.▇▇▇.▇▇▇▇
August 12, 1998
Dorfinco Corporation
c/o Textron Financial Corporation
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have acted as Nevada counsel for Preferred Equities Corporation, a Nevada
corporation ("Borrower"), in connection with certain matters related to a Four
Million and no/100 Dollar ($4,000,000.00) loan ("Loan") dated as August 12,
1998, from Dorfinco Corporation, ("Lender"), to Borrower. I have also acted as
Nevada counsel for Mego Financial Corp., guarantor of the Loan ("Guarantor").
The Loan is secured by the Deed (as hereinafter defined) in favor of Dorfinco
on certain parcels of land in Pahrump, Nevada as described in said Deed ("the
Property"). This opinion is being delivered in accordance with certain
requirements of the Loan.
I have reviewed the following documents, all of which are dated August 12, 1998:
a. Loan and Security Agreement, between Lender and Borrower;
b. Promissory Note, in the stated principal amount of $4,000,000.00,
executed by Borrower;
c. Deed of Trust, Security Agreement and Fixture Filing (the "Deed"),
from Borrower, as grantor, to United Title of Nevada, as trustee, and
for the benefit of Lender as beneficiary;
d. County and Secretary of State of Nevada UCC-1 financing statement
(the "UCC Financing Statements") executed by Borrower;
e. Guaranty Agreement (the "Guaranty"), executed by Guarantor;
f. Environmental Indemnity Agreement, executed by the Borrower;
108
g. Subordination Agreement, executed by Borrower, as debtor, and
Guarantor, as creditor, in favor of and accepted by Lender;
h. Borrower's Certificate, executed by Borrower; and
i. Guarantor's Certificate, executed by Guarantor.
For the purpose of this opinion, the foregoing documents listed in paragraphs
a. through i. are referred to herein as the "Loan Documents". It is the opinion
of the undersigned that:
1. Borrower is a corporation, duly formed, validly existing and in good
standing under the laws of the State of Nevada. Borrower has full right,
power and authority to carry out and consummate all transactions
contemplated by the Loan Documents and has duly authorized the taking of
any and all action necessary to carry out and consummate the transactions
contemplated to be performed on its part by the Loan Documents. Borrower
has executed and delivered each Loan Document.
2. Guarantor has the right, power, authority and capacity to execute the
Guaranty. Guarantor has duly authorized, executed and delivered the
Guaranty. The Guaranty constitutes the legal, valid and binding obligations
of Guarantor, enforceable against Guarantor, subject to the limiting
conditions of 8. infra of this opinion, in accordance with its terms.
3. No consent, approval, order, authorization, registration, declaration or
designation of or filing with any governmental authority of the United
States or the State of Nevada, or any subdivision thereof, is required in
connection with the authorization, execution, delivery or performance by
Borrower and Guarantor, as applicable, of the Loan Documents or the
consummation of any of the transactions contemplated thereby, except for
the recordation or filing of the Deed and the UCC Financing Statements.
4. Other than as shown on Exhibit "A" attached hereto there are no suits,
actions, proceedings or investigations pending or, to the best of my
knowledge, threatened against or involving Borrower, Guarantor or the
Property before any court, arbitrator or administrative or governmental
body. None of the matters shown on Exhibit "A" including but not limited to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ vs. Mego Mortgage Corporation, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and Mego
Financial Corp., shall, to the best of my knowledge after reasonable
inquiry, result in any material adverse change in the contemplated
business, condition or operation of Borrower, Guarantor or the Property.
2
109
5. The execution, delivery and performance of the Loan Documents and the
documents, instruments and agreements provided for therein will not result
in a breach of or default under (i) any other document, instrument or
agreement to which Borrower is a party or to which Guarantor is a party or
by which Borrower or Guarantor or any of Borrower's or Guarantor's property
is subject or bound; or (ii) any law, statute, ordinance, judgement, order,
writ, injunction, decree, rule or regulation of any court, administrative
agency or other governmental authority, or any determination or award of
any arbitrator, of the United States or the State of Nevada, or any
subdivision thereof, by which Borrower or Guarantor or any of Borrower's or
Guarantor's property is subject or bound.
6. All certificates, licenses, permits or approvals which must be issued by
any federal, state or municipal authority as a condition for the present
use or occupancy of the Property have been duly issued and are in full
force and effect.
7. Assuming the collection of interest and other charges provided for in the
Loan Documents is undertaken strictly in accordance with the terms thereof,
the Loan Documents will not violate the usury laws of the State of Nevada.
8. If governed by Nevada law, the Loan Documents are legal, valid, binding and
enforceable against Borrower in accordance with their terms, subject to
bankruptcy, insolvency, moratorium and similar laws affecting the rights of
creditors generally and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), and except that certain provisions of the Loan Documents may not be
enforceable in whole or in part under the laws of the State of Nevada, but
the inclusion of such provisions does not affect the validity of the Loan
Documents, and the Loan Documents contain adequate provisions for enforcing
payment of the monetary obligations of Borrower under the Promissory Note,
and for the practical realization of the rights and benefits afforded by
the Loan Documents, provided such enforcement is conducted in accordance
with the procedures established by the laws of the State of Nevada.
9. Without limiting the opinion expressed in 5 supra, to the best of my
knowledge, the execution and delivery of and performance by Borrower and
Guarantor under the Loan Documents do not and will not violate any state
statute, rule or regulation. As used herein, the term "to the best of my
knowledge" means to my Actual Knowledge as the term "Actual Knowledge" is
defined in the Legal Opinion Accord of the ABA Section of Business Law
(1991).
3